African Eurobonds Yields Dip as Global Rates Dynamics Fuels Rally

African Eurobonds Yields Dip as Global Rates Dynamics Fuels Rally

African Eurobonds rallied as foreign portfolio investors adjusted their portfolios to align with global interest rates dynamics, including fluctuations in oil prices.

The U.S. cut fed fund rates by 25 basis points three times, and the European Central Bank (ECB) has continued to keep rates unchanged, while the Bank of England has suddenly become dovish.

The economic condition in Africa is fast changing due to reform, with Ghana leading the rate cut with a 1000 basis point slash in the year. Nigeria is a bit tight on interest rate, which stand at 27% versus a 14.45% inflation rate.

Egypt’s economy is facing pressures but with a positive outlook due to huge investment from Qatar and multilateral lenders support – aiming to drive momentum.

Oil-linked issuers namely Nigeria, Angola recorded significant buying interest with moderate demand for Egypt, Ghana and other top African names with an elevated risk premium to compensate for risk taking.

Supported by the bargain hunting, the Nigeria Eurobond rebounded, with the average yield declining by -4 bps week on week to close at 7.10% compared with 7.14% recorded in the previous week.

Notably, the 16-FEB-2032 (-12 bps), 28-SEP-2033 (-12 bps) and 28-NOV-2027 (-14 bps) recorded the largest yield declines in the period under review. Analysts at Anchoria Securities Limited attribute this to renewed investor sentiments amidst reforms and hope for economic growth.

The volatile but positive trade actions on African Eurobonds were influenced by changing global interest-rate dynamics, movements in oil prices, and key U.S. economic data, AIICO Capital Limited told investors.

The week began on a firm note, supported by a rally at the long end of the U.S. Treasury curve, more attractive entry levels, and favourable technical conditions that boosted demand for high-yielding emerging market assets.

By mid-week, sentiment weakened to mildly bearish as oil prices softened, U.S. yields edged higher—especially at the front end—and uncertainty around upcoming U.S. data encouraged modest profit-taking across selected maturities.

AIICO told investors in a note that despite this, targeted buying interest remained evident, particularly in the Nigeria 2029 bond, underscoring value-driven demand.

Following a softer-than-expected U.S. CPI and stable labor market data, global rates steadied and risk appetite recovered, driving renewed buying interest into the market toward week’s end.

The Bank of England (BoE), at its December 2025 meeting, cut its policy lending rate by 25 basis points to 3.75%, bringing borrowing costs to its lowest level since 2022.

The decision clearly underscores policymakers’ response to easing inflationary pressures and signs of a cooling labour market, reaffirming the central bank’s commitment to a more accommodative stance as economic conditions move closer to stipulated targets.

UK’s headline inflation eased to 3.20% year-on year in November ’25, down from 3.80% recorded in October ’25, according to data from the Office for National Statistics (ONS). This marks the lowest reading since mid-2023 and reflects continued disinflationary momentum.

European Central Bank’s (ECB’s) took tough decision to keep interest rates steady, maintaining its main refinancing rate at 2.15% and signalling that while inflation is easing, policymakers remain cautious about premature easing.

This stance provided reassurance to markets that rate cuts could come later in 2026, supporting risk appetite without triggering volatility.

Backed by stable oil prices, light investor positioning, and attractive relative valuations, the market finished the week with a modest rally, as the average benchmark yield declined by 10 bps to 7.07%.

Analysts expect the market to maintain a cautiously positive tone next week, supported by bargain-driven demand and potential easing in global rates, though liquidity may be light due to the holiday period.

“We expect sentiment to remain positive in the near term, supported by expectations of easing global yields and sustained investor appetite in Nigerian instruments,” Anchoria Securities Limited said.

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