Nigeria’s Eurobonds Yield Climbs as FPIs Offload Portfolio
Reflecting shifting global risk sentiment, the average yield on Nigeria’s sovereign Eurobonds rose due to sell pressures as foreign portfolio investors (FPIs) reacted to the U.S. Fed rate decision.
The sell-offs witnessed across the short-, mid-, and long-term segments of the curve provoked a 9 basis points increase in benchmark yield, which settled at 19.51% on Friday.
Last week, the financial markets reacted generally to U.S. Federal Reserve meetings, alongside geopolitical tensions and the imposition of new tariffs.
The Fed’s decision to maintain rates at 4.50% sparked a rally, as Chair Powell hinted at potential rate cuts. However, toward the end of the week, profit-taking and lingering geopolitical uncertainties weighed on SSA Eurobonds.
Investors assessed the potential impact of these factors on their dollar-denominated holdings, leading to an upward movement in yields for JAN-31, FEB-30, and NOV-27 instruments, Cowry Asset Limited said in its investors note.
The Eurobonds market sentiment shifted midweek as oil prices recovered and the Fed signaled two potential rate cuts this year, boosting bullish interest.
By Friday, bearish sentiment resurfaced with interest in Jan-31 (+18bps) and Feb-32 (+14bps) maturities which saw the steepest yield increases, with the mid-end of the curve hit the hardest.
The U.S. benchmark 10-year Treasury yield rose on Friday but held in the relatively tight range it has traded in this month as investors balanced uncertainty over the impact of tariffs with the likelihood that the Federal Reserve will keep rates unchanged for the time being.
Investors are worried that tariffs will increase inflation in the near term while also weighing on economic growth. Federal government layoffs are also expected to lead to higher unemployment.
The impact of the new policies has not been captured in the economic data. That is leaving market participants and the U.S. central bank to largely adopt a wait-and-see approach to where interest rates should be.
There is lack of conviction in the market, said Molly Brooks, U.S. rates strategist at TD Securities. Fed Chair Jerome Powell on Wednesday described the uncertainty faced by Fed policymakers as “unusually elevated.”
Yields fell on Friday before drifting back higher and adding to gains after U.S. President Donald Trump said his top trade chief plans to speak with his Chinese counterpart next week.
Trump reiterated his plan to use trade levies to help narrow the U.S. trade deficit with its main economic rival, but said there will be flexibility in tariffs. He plans to introduce reciprocal tariff rates on countries globally on April 2.
New York Fed President John Williams said on Friday that it’s too soon to determine the impact of tariffs on inflation, adding that there are rising risks to the economic outlook and the central bank has time to decide the direction of its monetary policy.
The bond market, meanwhile, has been boosted by the Fed’s plans to taper quantitative tightening.
The U.S. central bank said on Wednesday that it will reduce the pace of the drawdown of its still-massive balance sheet, as it faces challenges in assessing market liquidity during an ongoing impasse over lifting the government’s borrowing limit.
Fed Governor Christopher Waller on Friday said he opposed the decision because the level of reserves in the banking system remains abundant.
The yield on benchmark U.S. 10-year notes was last up 2.1 basis points on the day at 4.254%. It has held in a range between 4.106% and 4.353% since February 25.
The 2-year note yield, which typically moves in step with interest rate expectations, fell 0.7 basis points to 3.95%. The yield curve between two-year and 10-year notes steepened by around 3 basis points to 30.3 basis points.
The Treasury will sell $183 billion in short- and intermediate-dated debt next week, including $69 billion in two-year notes on Tuesday, $70 billion in five-year notes on Wednesday, and $44 billion in seven-year notes on Thursday. #Transcorp Hotels Hits Record High Ahead of Dividend Payment
