FGN Eurobond Yields Inch Higher on Sell Pressures
The average yield on Federal Government of Nigeria (FGN) Eurobond yields inched higher in the just concluded week as investors sold off instruments, according to market reports. The fiscal policy authority has revealed a plan to halt Eurobond borrowing in 2022 due to tightening in the international debt capital market.
United States Federal Reserve is expected to book a 75 basis point interest rate hike again after its previous fast and furious hawkish pose as other global central bankers are adjusting rates to combat rising inflation pressures.
The new global market dynamic makes international borrowing more expensive than the initial plan as the Nigerian government adjusted the borrowing structure in line with fiscal responsibility provision between local and foreign debts.
In its note, Cowry Asset Limited hinted that Eurobond holders/ investors were mostly neutral on maturities tracked in the secondary market. In the local debt capital market, analysts noted that the value of FGN bonds traded remained flat for most of the maturities tracked, though bearish tendencies were spotted on transactions conducted.
Specifically, the 10-year, 16.29% FGN MAR 2027 instrument, and the 15-year 12.50% FGN MAR 2035 remained flat at N120.08 and N100.35 respectively, according to analysts note. READ: U.S Dollar Mixed as 10-Year Treasury Yields Inch Near 2%
Due to an inverse relationship between price and yield, the selloffs in the international debt capital market dragged yields on 10-year and 15-year lower to 10.72% (from 10.73%) and flat at 12.44% respectively.
However, Cowry Asset report shows that the price of 20- year 16.25% FGN APR 2037 debt instrument declined by N0.53 to N124.70 (from N125.24) and the yield rose 12.53% (from 12.46%).
Meanwhile the 30-year 12.98% FGN MAR 2050 bond rose by N0.11 to N98.80 from N98.69, while it yields declined to 13.14% (from 13.15%). Elsewhere, the value of FGN Eurobonds traded at the international capital market depreciated for all the maturities tracked on renewed bearish sentiment.
The 10-year, 6.375% JUL 12, 2023 bond, the 20-year, 7.69% FEB 23, 2038 paper and the 30-year, 7.62% NOV 28, 2047 debt lost USD 0.03 , USD 0.54 and USD 0.54 respectively; according to analysts note.
Meanwhile their corresponding yields rose to 8.93% (from 8.85%), 13.66% (from 13.54%) and 13.11% (from 12.99%) respectively. Analysts at Cowry Asset expect the value of FGN Bonds, to increase (and yields to fall) amid increased demand due to the maturing bills in the money market. #FGN Eurobond Yields Inch Higher on Sell Pressures
