The average yield on Nigeria’s US dollar bonds or Eurobonds settled lower following an increase in buying interest on the sovereign curve in the international market. African sovereigns are returning to international debt capital market again for borrowings at elevated rates.
Some local banks were noted to have sold their interest in Nigeria Eurobonds after the apex bank ordered a closure on their net open positions. However, analysts maintained that the sell orders were not fully complied with as the time to unload sovereign Eurobond assets in the international market was not fully considered in the apex bank’s directive.
The fast changing market dynamics in the Nigerian market have triggered a positive disposition towards the country’s borrowing instruments in general. Yields on government gilt edge instruments have climbed to double-digit highs.
African countries are returning to the international debt capital market to access funds amidst sluggish economic expectation in 2024. High interest rate driven by global central banks inflation fighting policy rates hike had blocked some of the African soverigns from eurobonds market since covid-19 outbreak.
In the bond market, secondary market activity for FGN Bonds was mildly bearish, resulting in a 0.03% increase in the average secondary market yield to 17.25%. Also in the sovereign Eurobonds market, positive sentiment was observed across all ends of the yield curve, causing a decline in the average yield by 11 basis points to 9.85%.
African credits faced pressures at the start of 2024 due to stronger dollar and fiscal concerns, CardinalStone said in a review. On the former, the US dollar index (DXY) remained above its 5-year mean levels and drove concerns of overvaluation and potential correction.
“To our minds, expectations of a possible global rate cut in 2024 may continue to support investors’ interest, which may, in turn, encourage more African sovereigns to tap the Eurobond market”, Cardinalstone analysts said in the update.
