Nigeria Eurobonds Yield Rises 8bps on Risk-Off Sentiment
As the market awaits the US Federal Reserve’s rate decision, Nigerian sovereign Eurobonds sold off in international capital markets amid a surge in inflation.
There was selling pressure across oil-linked African US-dollar-denominated papers, pushing yields higher. Ghana, Egypt, Angola and Nigeria saw yields climb as an interim peace agreement between the US and Iran sharply dragged oil prices lower.
The market experienced profit-taking across the curve as Nigeria’s inflation rate climbed to 15.93% in May, according to the statistics office, versus the monetary policy rate of 26.5%.
Profit-taking ensued as investors locked in gains, while sentiment remained cautious amid moves in US Treasury yields and broader risk appetite in emerging markets.
At the close of the trading session on Tuesday, the average yield on Nigeria’s Eurobonds rose by 8 basis points to 6.82%, according to Cowry Asset Management Limited.
The increase in yields suggests softer demand from offshore investors and a more cautious outlook toward Nigeria’s dollar-denominated sovereign debt instruments amid prevailing global market uncertainties
The market is trading cautiously on Wednesday as investors look ahead to the US Federal Reserve’s Federal Open Market Committee (FOMC) decision.
Analysts said a cut in US rates might help dampen the effect of rising yields on the eurobonds of oil-exporting countries, as easing of the Middle East crisis pushes yields higher.
A hold is the more likely outcome, keeping yields elevated while preventing further deterioration; a neutral-to-marginally negative outcome for emerging market fixed income. Nigeria’s Eurobonds Yield Slides Below 7% after Rates Hold
