Nigeria Eurobond Yield Rises as FPIs Embark on Asset Trimming
Offshore of foreign portfolio investors (FPIs) trimmed Nigeria’s sovereign Eurobond holdings in the international market amidst riskoff sentiment. Foreign investors’ sentiments turned bearish as portfolio managers continued to assess key developments in the Nigerian market in relation to global market conditions.
At the February meeting, the Central Bank of Nigeria (CBN) left the Monetary Policy Rate (MPR) and other key parameters unchanged, signaling a wait-and-see approach as it assessed the transmission effect of previous rate hikes on the economy.
By maintaining the status quo, the CBN aimed to avoid unnecessary shocks that could derail the market’s newfound stability while ensuring that prior tightening measures continued to filter through the system, Erad Partners Limited said in a commentary note.
But the U.S. economy has started to see its number getting red amidst the protectionist stance of President Donald Trump administration, which has continued to deploy his ‘madman theory’ in policy formulation.
On Wednesday, profit-taking continued in the Eurobond market, albeit at a measured pace, as investors sought to offload their holdings. The Eurobond market initially rebounded as optimism grew over potential tariff relief under President Donald Trump.
However, sentiment turned bearish amid a further drop in oil prices and after a weaker-than-expected private-sector jobs report raised concerns about economic growth.
ADP data revealed only 77,000 jobs added in February, a sharp decline from January and well below forecasts. This report, part of a series leading to Friday’s nonfarm payroll data, highlighted potential economic vulnerabilities.
Overall, the average mid-yield for Nigerian Eurobonds increased by 5 bps to 9.02%. Selling pressure was evident across the curve, with the short end bearing the most impact, particularly the Nov-25 maturity, rising by 4 bps. Analysts said they expect the negative sentiment to persist unless there is a favourable development on the international or local front.
In February, the global fixed-income market experienced notable shifts, driven by monetary policy adjustments, geopolitical tensions, and growth concerns, according to CardinalStone Partners Limited.
The investment firm said bond yields declined across major economies, closely tracking movements in U.S. Treasury bonds. The 10-year Treasury yield fell to 4.2%, its lowest level since early December 2024, marking a reversal from the initial bearish reaction in January.
Earlier, markets were primarily focused on the inflationary impact of Trump’s tariff policies, reinforcing expectations of prolonged higher interest rates.
However, sentiment shifted in February as investors responded to weakening economic data, leading to a gradual de-risking of portfolios. Notably, the February ISM manufacturing survey revealed an unexpected contraction in new orders and employment indicators, signaling potential economic softening. Nigeria Turns Down Bids over Excess Demand for Local Bonds
