Foreign Investors Boost Interest in Nigeria US Dollar Bonds
Ahead of a plan to raise Eurobonds to support the Nigerian government budget deficit, foreign investors have raised their holdings of the sovereign US dollar bonds. The buying momentum continues from last week’s trade pattern.
Nigeria is currently offering higher rates to attract foreign investors into the economy to reduce the scarcity of forex inflows, which has bedridden the local currency. Rates on short term Treasury bills remained above 21% despite high inflation conditions.
In the sovereign Eurobonds market, there was mild positive trading activity on Nigeria’s US dollar bonds, trimming the average yield to 9.91%, Cowry Asset Management Limited told investors via email. Trades have been moving both sides of the international market for sovereign Eurobond assets amidst an unclear outlook about rates, and inflation conditions.
As the ongoing positive reforms send hope signals about an economic resurgence in the year, foreign investors rally on Nigeria’s US dollar bonds. The bullish trend resulted in a 0.01% decline in the average yield to close at 9.91%. The expected US Fed rate cut has been pointed out as one of the monetary actions that will reset market direction in the second half of 2024.
The yield on the US 10-year Treasury note steadied at 4.28% on Friday, after climbing by 19 basis points this week and holding at high levels not seen since late February. Traders brace for the Fed’s monetary policy decision next week, with the central bank expected to keep the Fed funds rate steady, although investors will scrutinize new economic projections and any further clues on when the Fed will start cutting interest rates.
Currently, there is a 57% chance of a 25 basis point rate cut in June, but traders are growing more confident that any cuts will likely occur later in the year, especially after recent consumer price index (CPI) and producer price index (PPI) data exceeded expectations.
“We expect both the US Federal Reserve and ECB to cut rates three times, by a total of 75 bp, by year-end,” Fitch Ratings projected in a commentary note. Naira to Appreciate to N1200 vs US Dollar -Goldman Sachs
The firm said both central banks want to see more evidence that recent disinflation progress is durable before starting the policy-easing process. “We have pushed back the date of the first Fed cut to July from our previous expectation of June. We have also pushed back the date of the first ECB cut to June from April”.
In the bond market, trading activity leaned towards bullish territory, resulting in a marginal decline in the average yield by 0.01% to 18.33%. #Foreign Investors Boost Interest in Nigeria US Dollar Bonds Undersea Cable Cuts Disrupt Telecom Services Across W/Africa –NCC
