Foreign Investors Increase Positions in Nigeria Eurobonds, Yield Swings

Foreign Investors Increase Positions in Nigeria Eurobonds, Yield Swings

The average yield on Nigeria sovereign Eurobond slide by seven basis points as a result of latest portfolio rebalancing to optmise returns as central bankers keep interest rate elevated.

The increased demand for Nigeria US dollar denominated bonds followed expectation the ongoing reform would spur local economic growth in 2024.

Some analysts are started to predict surge in demand for Nigeria US dollar on expectation that the Federal Reserves would slash rates as inflation pressure eased. On Wednesday U.S. core inflation slowed to 3.6% in April.

Though there have been myriad of economic pressures but the IMF is hopeful there would be improvement in the macroeconomic conditions in the year.

The apex bank is expected to hike rate next week at its monetary policy committee meeting due to accelerating inflation rate. Latest report from the statistics office showed that inflation rate climbed to 33.69% in April, with negative impacts on purchasing manager index.

In the sovereign Eurobonds market, buy-interest was evident across all segments of the yield curve, resulting in a decline in the average yield by 0.07% to 9.77%, Cowry Asset Management Limited told investors via email note.

2Y US Treasury yields fell three basis points to touch a six-week low of 4.705%. 10Y US treasury yields, which dropped nine bps on Wednesday, fell a further four bps to 4.313%, also a six-week low.

On Wednesday U.S. core inflation slowed to 3.6% in April. That was in line with market expectations but taken by traders as an encouraging signal after a few months of stickiness.

10Y Eurozone bond yields, which fell sharply in the wake of U.S. inflation data, continue to decline, with the 10-year Bund yield trading almost 2 basis points lower at 2.407%, according to Tradeweb.

In the secondary market for FGN Bonds, trading activity was on naira asset closed slightly on a mixed note. However, the average yield stayed muted at 18.64%. AfDB, Other Approve Use of Special Drawing Rights for Hybrid Capital Instruments