Sell Pressures on Nigeria Eurobonds Drive Yield Surge
Benchmark yield Nigeria’s sovereign US dollar bonds trading at the international market inched higher as a result of risk-off sentiments in the space. This is a reversal of previous buying momentum witnessed in the space early in January amidst the Nigerian government’s renewed hope agenda.
The yield on Nigerian Eurobonds crossed 10% this week as foreign investors offloaded the sovereign US dollar assets. On the other hand, the 10-year US Treasury yield declined 0.047 percentage points to 4.131%, snapping a two-trading-day streak of rising yields.
There have been records of selloffs after the inflation rate accelerated in December to 28.92%, signalling continuing policy tightening by the monetary authority. At the same time, the US consumer price index rose, causing investors in Nigeria’s sovereign Eurobond to weigh assets as the US Fed’s slowdown rate hikes.
Traders said in their separate note that bearish sentiment prevailed across all segments of the yield curve, causing a 12 basis points increase in the average yield. US dollar bond benchmark yield expanded to 10.26% on Thursday’s close, traders at Cowry Asset Limited told investors in a note.
MarketForces Africa reported that the average yield increased by +9 to close at 10.0% on Friday. According to the Office of National Statistics, UK headline inflation increased to 4.0% year on year in December 2023 from 3.9% recorded in November. This marks the first increase in the headline inflation in ten months.
In the local market, trading activities on FGN Bonds were subdued amidst changing market dynamics. Traders reported there was muted interest in select mid and long-dated maturities leading to another muted close in the average secondary market yield, settling at 13.59%.
