Nigeria US Dollar Bonds Yield Rises to 10%
The average yield on Nigeria’s US dollar bond has expanded above 10%, traders’ notes showed amidst risk-off sentiment that greeted investors in the international debt capital market.
Investors adjusted their interest in Nigerian borrowing instruments amidst expectations that there will be a series of policy re-assessment in the New Year.
Nigeria’s headline inflation rate has become ugly and the naira has lost significant value due to scarcity of foreign currency inflows into the local economy.
At the over-the-counter market, foreign investors’ sentiment was bearish, particularly across the mid and long ends of the yield curve, causing a 34 basis points increase in the average yield to 10.06%.
US Treasury yields have backed off in the first two trading days of 2024. The yield on the US 10-year Treasury note steadied around 3.92% on Thursday, remaining above five-month lows of 3.78% touched last week, as traders digest the recent FOMC minutes while awaiting the jobs report due tomorrow.
The minutes revealed a consensus that rate cuts are likely to be appropriate this year but policymakers stressed the need to remain data-dependent and reaffirmed that policy must remain at a restrictive level before the economy shows clearer signs that inflation will converge to the target.
In the local market, the FGN bond secondary market traded with bullish sentiments, as the average yield contracted by 23bps to 13.9%, according to analysts’ notes.
Across the benchmark curve, Cordros Capital reported that the average yield dipped at the short (-22bps), mid (-25bps) and long (-23bps) segments. Naira Lost 11% as Banks Issue New Update on FX Spending
The contractions were attributed to demand for the APR-2029 (-95bps), JUL-2030 (-56bps) and APR-2037 (-40bps) bonds, respectively.
The US Manufacturing Purchasing Manager Index (PMI) declined to 47.9 in December 2023 compared with 49.4 in November. This marks the lowest reading since September and can be partly attributed to sluggish demand for inputs in the sector.
Meanwhile, Service PMI increased marginally to 51.3 in December vs 50.8 in November. Overall, the Composite PMI rose to 51.0 from 50.7 in November. Looking ahead, business expectations signal subdued growth in Q1-2024.
