Nigeria Eurobond Yield Rises as FPIs ‘Disengage’
Nigeria’s US dollar bonds benchmark yield rose by 2 basis points over risk-off sentiment exhibited by foreign portfolio investors (FPIs) in the market on Monday.
The bearish outing witnessed in the Eurobond segment occurred despite notice that the Nigerian government is in the midst of driving economic reform to the next level – with a core focus on monetary policy redirection.
Foreigners’ decisions to disengage asset holding come along with increased demand for US Treasury assets, MarketForces Africa gathered from Broadstreet experts, and investment banking analysts.
In its market update, Cowry Asset Limited said sell sentiment was evident across the short, mid, and long ends of the yield curve, resulting in a 2bps increase in the average yield to 10.86%.
The yield on the US 10-year Treasury note fell to 4.38%, a low level not seen since September 20th, and moving further away from 2007-highs of 5% touched in October, with traders increasingly betting the Fed’s tightening campaign is over.
The 30-year US Treasury yield declined 0.084 percentage points to 4.533%, the largest one-day yield decline since Tuesday, Nov. 14, 2023. Yield is down five of the past seven trading days.
The benchmark 10-year U.S. government bond yield closed Monday’s session down by 48.6 basis points for the month to date amid hopes that signs of slower inflation will help the Federal Reserve start trimming interest rates next year.
At the same time, data released so far continues to paint a mixed scenario, with the preliminary S&P Global PMIs showing manufacturing fell more than expected while services rose faster.
The Eurozone services PMI increased to 48.2 in November ‘23 from 47.8 in October ’23. Overall, the composite PMI also increased to 47.1 in November ‘23 from 46.5 in October ’23.
Looking ahead, business confidence remained unchanged, with firms maintaining a moderate level of optimism regarding the outlook for activity in 2024. In the Eurobond market last week, the average yield declined by -20bps to close at 10.8% with US Treasury bills hitting down the curve. Naira Steadies as Banks Issue Update on FX Purchase
In the local bond secondary market for FGN bonds, the average yield increased by +20bps to close at 15.9% week on week, traders said.
