African Eurobonds Face Sell Pressure Ahead of Fed Rate Action
With yields surging across top issuers, African Eurobonds came under selling pressures at the international market ahead of the US Federal Reserve decision on rates.
The African Eurobond market traded bearishly as investors began profit-taking from the recent bullish trend and ahead of the Fed rate decision on Wednesday.
Oil-linked issuers’ notes were priced down amidst uncertainties in the global commodity market with significant moves toward Gold, and other precious assets.
Global oil prices slipped 2% on Monday after Iraq restored production at one of its oilfields, which accounts for 0.5% of world oil supply, while investors weighed ongoing talks to end the war in Ukraine.
Accordingly, Brent crude shed 131 cents, or 2.05%, to $62.44 per barrel, while U.S. West Texas Intermediate (WTI) lost 127 cents, or 2.11%, to $58.81.
Offshore investors have priced in the rate cut expectation in recent times as the drive to grow American economy, reduce inflation and boost employment increased after the U.S. government shutdown last month.
Foreign portfolio investors’ risk-off sentiment was further impacted by the global oil price decline amid ongoing talk to end Ukraine war.
Nigeria’s sovereign Eurobond yield rose as a result of sell pressures witnessed on Monday. Similar negative sentiment was observed across peer sovereigns, including Ghana, Egypt and Angola.
Notably, yields across major oil-producing economies (Nigeria, Angola and Egypt) rose sharply, leading to price decreases across maturities.
Given the sentiment, the average Nigeria benchmark yield rose by 10 bps to 7.24% – the market is expected to remain cautious as participants sharply focus on Wednesday’s Fed rate decision.
Secondary Eurobond yields declined by 36 bps week on week to 7.14% per annum on Friday, supported by improved investor interest. #VFD Closes Strong as Investors Confidence Surges, Defies Rights Issue Pressure
