Nigeria Eurobond Yield Spikes over Sell Pressures
Nigeria’s US dollar bonds continue to face sell pressures in the international capital market amidst risk off sentiment following the US Fed’s decision to maintain the status quo on fund rates.
Foreign investors and traders have continued to swing in reaction to the Nigerian government policy strategy to drive economic growth and manage the US dollar shortage challenge that has affected the local currency exchange rates.
FX pressures gathered momentum yesterday as the Nigerian naira inched closer to a parallel market rate. Nigeria is expected to receive $1.5 billion loan from a multilateral lender and another $10 billion is on the way, according to Wale Edun, finance minister.
In Nigeria’s sovereign Eurobonds market, activity level was bearish as sell sentiment seen in most maturities led to a slight increase in the average yield higher by 14bps to 11.21% on Thursday.
The authority plans to support budget deficit finance in 2024 after the debt agency has successfully reduced borrowing costs through the local debt capital market.
Nigeria and most African nations were locked out from the international debt capital market post covid-19 as central bankers turned market rates belly upside down in a bit to fight pandemic-driven consumer inflation.
The decision to hike rates successively by the US Fed in particular, and the European Central Bank made US dollar-denominated bond capital raise quite expensive for countries struggling with fiscal slippage.
In the local bond market for FGN Bonds, trading activities ended on a mixed note on Thursday as the average yield slightly declined by 9bps to 15.67%. This was propelled by a yield reduction of 223 basis points seen in the MAR-24 FGN paper. Naira Depreciates to N996.75, Trailing Black Market Rate