Nigeria’s sovereign Eurobond market saw selling pressure across short, medium, and long maturities, pushing the average yield up by 0.13%, ending the week at 9.6%. This movement comes as the market adjusts to recent interest rate changes, with the U.S.
Federal Reserve cutting rates while Nigeria’s central bank raised its benchmark rate to 27.25% in September, prompting a shift in investment strategies.
Economic indicators suggest Nigeria is experiencing positive trends in disinflation and growth. However, sentiment-driven concerns weighed on Nigeria’s Eurobond market, dampening investor confidence.
Despite this, analysts anticipate an increase in demand for Nigerian Eurobonds due to their attractive yields compared to U.S. Treasury bonds in the international capital markets.
In the U.S., bond yields dipped on Friday after inflation data showed continued easing, raising the likelihood of another substantial rate cut by the Federal Reserve at its November meeting.
Fixed income traders reported that optimism surrounding the U.S. Federal Reserve’s rate cut gave African Eurobond markets, including Nigeria’s, a strong start to the week.
Analysts have started to project flood of hot monies coming to African economy in the coming months. Additionally, news of China’s stimulus package led to a significant rally in the Asian markets, impacting the African Eurobonds, AIICO Capital Limited said.
The foreign bonds market ended negatively due to a substantial decline in oil prices caused by the possibility of increased oil supplies from Saudi Arabia, overshadowing China’s efforts to stimulate its economy and few profit takings.
Overall, the average mid-yield on the Nigerian bond curve increased by 27 basis points week-on-week, reaching 9.6%.
In the FGN bond market, the average yield across tenors rose 7 basis points to 18.5% owing to bearish repricing in the over the counter market.
US 10-Year bonds offer a balance of higher interest rates and lower volatility, suitable for cautious investors seeking long-term gains and portfolio diversification.
The yield on the 10-year US Treasury note held its recent decline to around 3.75% on Monday as soft US economic data reinforced expectations of further Federal Reserve rate cuts.
China’s 10-year government bond yield surged to around 2.21%, reaching a three-week high, as investors reacted to the latest PMI reports.
Australia’s 10-year government bond yield held steady at around 3.98% as investors continued to assess the Reserve Bank of Australia’s monetary policy outlook.