Foreign Investors Take Profit on Nigerian Eurobonds Ahead of Inflation
Foreign portfolio investors (FPIs) took profit on Nigeria’s sovereign Eurobonds in the international capital market ahead of inflation data for December 2024. Trading session ended bearish with sovereign bonds from Sub-Saharan Africa and North Africa experiencing a sell-off.
Lingering concerns about inflation and uncertainty regarding potential policy changes under the incoming Trump administration negatively impacted market sentiment, AIICO Capital Limited told investors in a note.
On Wednesday, the sell pressure on Nigeria’s US dollar bonds provoked a spike in yield amidst market consensus that the country’s headline inflation would accelerate further before the next disinflation in 2025.
Offshore investors have continued to rebalance their respective portfolios to take advantage of better returns on foreign-priced assets.
For investors, including Nigerian local banks with strong appetites for US dollar-priced assets, globally, geopolitical shifts and fiscal stimulus policies, particularly from the US, make diversification essential.
CardinalStone Securities said high-yield Eurobonds in emerging and frontier markets present attractive opportunities, while defensive equities in developed markets and select growth sectors in emerging markets can provide stability and other potential portfolio benefits.
The sell pressure was evident across the curve, particularly at the short to mid ends, pushing the average benchmark yield up by 21 bps to 9.39%, TrustBanc Financial Group Limited told investors in a note.
Notably, the Nov-27 and Mar-29 maturities recorded the most significant increase in yield, rising by 24 bps and 29 bps, respectively, analysts explained.
Traders added that across the broader SSA curve, performance was mixed: Ghana and Angola mirrored Nigeria’s bearish trend, while Egypt and South Africa saw mixed sentiments.
Fixed income market analysts and traders anticipate a mixed theme this week as investors analyse the U.S. Federal Open Market Committee’s (FOMC) last meeting minutes for guidance on interest rate trajectory. #Foreign Investors Take Profit on Nigerian Eurobonds Ahead of Inflation Africa Prudential Hits 52-week High
