Yield on Nigeria’s Eurobond Rises as Foreign Investors Selloff
The Nigeria’s Eurobond market was heated up with selloffs from foreign portfolio investors (FPIs) seeking alpha on international debt securities. The selloffs that lasted longer raised benchmark yield by nine basis points week on week, according TrustBanc Capital Limited with trades seen across longer curve.
A slew of fixed interest securities analysts said Nigerian Eurobond has been trading positive, signaling a positive shift in sentiment, with Nigeria’s yields becoming increasingly attractive. Investors also appeared more confident in Nigeria’s reform.
But last week, benchmark yield climbed. According to Cowry Asset Limited, sell pressure across the short, mid and long end of the yield curve led to a 0.09% rise in the average yield, bringing it to 9.73%, traders said.
Foreign portfolio investors’ mood switched negative in the international capital market ahead of US election in the new week. The last week selloffs reverse previous trends, signaling investors’ moves to rebalancing portfolios and optimise returns.
Traders at TrustBanc Capital Limited said in a report that Eurobond market began the previous week on a negative note, as the bear regained control. However, market sentiment briefly shifted on Tuesday, as investors picked up selected maturities across the yield curve.
There was a higher intra-day prices briefly on Friday after the October Jobs report, AIICO Capital Limited told investors in a note. Despite this midweek optimism, the market ultimately closed on a negative note as the bears consolidated their hold on the Eurobond market.
Similar bearish sentiment was observed across the SSA curve. Analysts expect yields to continue their upward trend barring any significant positive development on the international or local front.
Overall, African sovereigns saw a negative trend, with Nigerian bonds’ average mid-yield rising to 9.71% week-on-week.
In the Sub-Saharan African Eurobond market, bearish sentiment dominated, with the average yield climbing by 1% to 25.2% in Oct, mainly due to steep losses on the GABON 2024 and NIGERIA 2027 bonds.
Afrinvest Capital Limited highlighted that Ghana’s restructured Eurobonds experienced gains on their second day of trading after Fitch Ratings removed them from default status, assigning a ‘CCC+’ rating.
This rating reflects Ghana’s anticipated credit profile following its debt restructuring, which is expected to lower debt levels through fiscal consolidation, analysts said. However, liquidity risks remain high due to significant interest expenditures relative to revenue.
Afrinvest said the restructured bonds offer investors two options: a 37.0% principal reduction in exchange for two new bonds maturing in July 2029 and 2035 with a 5.0% interest rate until 2028 (rising to 6.0% thereafter), or a bond maturing in January 2037 with a 1.5% interest rate. #Yield on Nigeria’s Eurobond Rises as Foreign Investors Selloff
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