Nigeria’s Eurobond Yield Rises as FPIs Liquidate Positions
The average yield on Nigeria’s Eurobond rose as foreign portfolio investors (FPIs) liquidated positions amidst U.S. interest rate cuts. The risk-off reactions followed sustained monetary easing in the U.S. amidst expectations that a rate cut would cause a flight to safety in 2025.
Offshore investors sentiment began to decline when Nigeria’s headline inflation accelerated faster in November, beating consensus analysts estimates. The market saw strong appetite for Nigeria’s sovereign Eurobonds on the back of elevated yield versus 10-year US Treasury yield fluctuations.
Before Nigeria’s latest Eurbond market visits, where $2.2 billion notes were sold, investment analysts have projected that a flood of hot money will reach Africa in the coming years as foreign portfolio investors hunt for alpha, leveraging the strong US dollar.
On Thursday, sell pressure was seen across the short, mid, and long ends of the yield curve as investors reacted to U.S. Federal Reserve extended monetary policy easing to boost employment.
The liquidated Eurobonds led to a 22 basis point increase in the average yield, which settled at 9.65%, according to Cowry Asset Limited. AIICO Capita Limited told investors in a note that the Eurobond markets in Nigeria, Angola, and Egypt experienced notable declines as investors adopted a risk-off approach due to global economic uncertainties and reduced demand for high-yield assets.
Analysts attributed the shift in appetite to concerns over slowing growth, geopolitical tensions, and tighter financial conditions. Meanwhile, U.S. Treasury yields reached a seven-month high after the Fed’s unexpected hawkish stance, reducing their 2025 rate cut projections from four to two.
The Nov-2027 and Mar-2029 Eurobond maturities recorded the most significant increase in yield on the back of selloffs, according to TrustBanc Financial Group. The selloffs caused their yield to increase by 25 and 29 basis points, respectively.
Similar bearish sentiment was observed across the curve in Ghana, Egypt, and Angola. Looking ahead, we expect the negative sentiment to persist unless there is a favourable development on the international or local front. #Nigeria’s Eurobond Yield Rises as FPIs Liquidate Positions Naira Rallies on CBN FX Sales to Banks, Plan to Dedollarise
