Selloffs Provoke 10bps Yield Surge on Nigeria’s US Dollar Bond
Nigerian US dollar bond, or sovereign Eurobonds, came under selling pressure on the global market amidst expectations that the US Fed could cut fund rates in the third quarter of 2024.W
With inflation continuing to harm Nigeria’s price outlook, the high interest rate mood among global central bankers prompted a swift flight to safety, driven by rising economic risk and a negative interest yield.
Already, the US bond market is on the verge of breaking into higher yields amidst diverse expectations about Fed funds rate cut and US economic performance.
At the monetary policy committee meeting, Nigeria’s apex bank extended its contractionary stance, which resulted in a 1.50% increase in the benchmark interest rate. Despite this, local bond market rate repricing has been slow as debt management seeks to reduce the nation’s debt servicing cost.
Foreign investors watching the dynamics raised economic risk associated with their investment, resulting in sell sentiments across Nigeria’s sovereign Eurobonds in the market last week.
The risk off sentiment caused price decline in the Feb-30 US dollar bond, whose yield jumped by 16 basis points, Sep-38 instrument’s yield surged by 15 basis points; and the yield on Feb-32 Eurobond maturities increased by 14 basis points, according to Cowry Asset Management Limited.
Traders stated that the movement in yields across these lines pushed the average yield up by 10 basis points to 9.97%. Elsewhere, the US Treasury yield on short-dated Treasury debt rose faster than on longer-dated Treasury debt.
At the close of trading on Friday, two-year Treasury notes were yielding 47.9 basis points, or hundredths of a percentage point, more than 10-year Treasury debt. That compares with a gap of 45.9 basis points on Thursday and was the biggest differential so far this year. #Selloffs Provoke 10bps Yield Surge on Nigeria’s US Dollar Bond Financial Reporting in Hyper-Inflationary Condition Delays VFD Audited Report
