Nigeria, Angola, Egypt Yields Fall as African Eurobonds Rally
African Eurobonds rallied as foreign portfolio investors’ (FPIs’) risk-off sentiment witnessed early in the week at the international market began to fade.
The market saw investors ramping up Nigeria, Ghana, Angola, and Egypt amidst expectations that the global oil prices would continue to stay above $60 per barrel in the global commodity market.
Inflation in Ghana has dropped significantly since the beginning of the year, and Accra has axed interest rate by a whopping 10% in the currency year as the economy continues to improve.
Nigeria’s reforms eased economic pressures, and key macro indicators are getting better with significant growth in external reserves. Egypt is on a positive trend across key macro indicators, while oil has continued to boost Angola’s fiscal performance.
Pressures on energy costs have always been positive for African issuers with significant oil production volume for exports, with hydrocarbon sales boosting issuers’ fiscal performances.
According to a report from investment banking firm TrustBanc Financial Group, modest buying interest returned across the curve; investors continued to cherry-pick at favourable entry levels.
FPI’s portfolio rotation is noted to be influenced by the expectation that the U.S. will axe rates to boost the economy amidst jobs and consumer inflation concerns.
The average yields on Nigerian sovereign Eurobonds fell by 9 bps to 7.36%, Cowry Asset Limited reported, reflecting heightened international investor confidence in Nigeria’s external debt securities.
Oil-linked sovereign issuers were major attractions at the international market amidst fluctuating U.S Treasury yields. Investment experts explained that the African Eurobond market rebounded as investors reacted to the Nigeria Q3 GDP data that came stronger than market expectation.
The market positioning was partly influenced by improvement in global oil prices in the early part of the day amidst U.S. sanctions on Venezuela.
Notably, yields across major oil-producing economies – Nigeria, Angola and Egypt – dipped, leading to price increases across maturities. Sentiment is expected to remain positive barring any macroeconomic shocks
The market price of Nigerian Eurobonds with Jan-2046 expiration climbed to 107.047/107.288, from 105.646/105.957, according to an analyst update.
The Nov-2047, the Eurobonds paper price increased to 93.333/93.977 from 92.107/92.530. Jan-2049 note surged to 107.058/107.429 while Sep-2051 Nigerian sovereign Eurobonds rose to 97.126/97.824
