Nigeria’s Sovereign Eurobond Yield Slides to 10.3%
The average yield on Nigeria’s sovereign US dollar bond climbed as foreign portfolio investors increased positions, and raised bets in the international market as inflation began to ease.
The latest disinflation boosted foreign investors’ confidence and increased hope that there is a better day ahead following serious macroeconomic boosting initiatives.
Nigeria’s inflation rate eased for the first time in 19 months due to based effects and improved food supply in the local markets. According to data from the National Bureau of Statistics (NBS), the headline inflation rate fell 79 basis points to 33.4% in July, 2024.
“While this disinflation outcome was in tandem with our expectations, the magnitude was disappointing,” Afrinvest said in a note. Analysts at Afrinvest Limited had estimated that the headline rate would decline by 107 basis points in a base case to 33.1%.
This expectation was anchored on the base-year effect and decline in the price of certain farm outputs, such as yam, pepper, and vegetables, owing to gains from early harvest.
In the local market, the local FGN bond market had a bullish settlement with minimal bearish bias. As a result, the average mid-yield decreased by 18 bps to 19.39% on a week-on-week basis.
The Eurobonds market was mostly bullish this week, with the average mid-yield falling for most of the trading sessions amidst expectation that the US Fed reserve would cut rates in September.
The latest data showed that US inflation grew by 0.20% month on month, in line with market forecasts. However, year-on-year inflation grew by 2.90%, lower than the estimated 3.0% y/y.
The US Producer Price Index (PPI) increased by 2.20% year-on-year, down from 2.70% year-on-year, and by 0.10% month-on-month, down from 0.20% month-on-month in June.
In the Sub-Saharan African Eurobonds market, sentiment was shaped by widespread expectations that the Fed will ease its grip on interest rates following the release of softer inflation data in the US, Afrinvest said in a note.
Consequently, all papers in this market segment witnessed a yield decline, save the Gabon 2024 (+0.3%) and Benin 2038 (+8.6%) papers.
Specifically, the strong performance of Ghana 2025 (-7.2%) and Ghana 2026 (-1.5%) instruments drove the average yield down 21 bps week on week to 19.8%. Analysts said they expect bullish sentiment to persist as investors continue to price in the possibility of a rate cut in September.
The U.S. Treasury yield closed slightly lower on Friday, a day after fading recession fears led to an aggressive selloff as investors calibrated their expectations for the Federal Reserve’s next move.
The debate centers around how much of a cut in interest rates may come out of the meeting, with sentiment easing back to a cut of 25 basis points from the more aggressive 50 bps expected a few weeks ago. #Nigeria’s Sovereign Eurobond Yield Slides to 10.3%
Liquidity: Money Market Rates Fall as Banks Borrow N1.8trn from CBN
