Yield on Nigeria Eurobonds Below 9% Ahead of Inflation
The average yield on Nigeria sovereign Eurobonds declined, trending below 9% on the back of strong demand from foreign investors. The Eurobond market rebounded driven by strong demand across the SSA and North African regions despite weaker oil prices.
Nigeria and Angola saw gains of approximately +0.875 points, while Egypt averaged around +0.5 points. Additionally, the Producer Price Index (PPI), a key indicator of consumer inflation, rose by 0.4%, surpassing the expected 0.3% increase.
This suggests a resilient manufacturing sector and potential upward pressure on interest rates, benefiting the USD. Elevated yield and expectation that inflation could slow down if the statistics office carried on with plan to rebase the consumer price index.
On Thursday, the bulls maintained their grip on the Eurobond market, with strong buying interest observed across the benchmark curve.
Notably, the Nov-25 (-11bps) and Nov-27 (-10bps) maturities recorded the most significant yield declines, reflecting a preference for shorter-dated maturities, according to TrustBanc Financial Group Limited.
Consequently, the average benchmark yield declined by 8bps to close at 8.90% ahead of inflation data for January 2025.
In early January 2025, the global market was largely volatile, driven by uncertainties around President Trump’s second coming and his policies. Nevertheless, post-inauguration, Trump’s policy directions were clearer, and pressures on markets tapered. Consequently, US treasuries declined towards the end of the month after the sharp jump in the earlier part of January.
Elsewhere, after keeping policy rates constant in its last meeting, the US Fed said it is in no rush to initiate rate cuts until inflation and job data are supportive.
Justifying the Fed’s cautiousness, January inflation was higher than expected, rising by 50bps to 3.0%, outstripping the consensus estimate of 2.9%.
The inflation reading, coupled with looming tariffs, reduces the likelihood of rate cuts in 2025. With inflation looking sticky in the US, analysts expect treasury yields and the US dollar to rise in February.#Yield on Nigeria Eurobonds Below 9% Ahead of Inflation#
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