Nigeria is currently offering higher rates to attract foreign investors into the economy to reduce scarcity of forex inflows which has bedridden the local currency. Rates on short term treasury bills remained above 21% versus high inflation conditions.
Ahead of plan to raise Eurobonds to support Nigerian government budget deficit, foreign investors have raised their holdings of the sovereign US dollar bonds. The buying momentum continues from last week trade pattern.
In the sovereign Eurobonds market, there was mild positive trading activity on Nigeria’s US dollar bonds, trimming the average yield to 9.91%, Cowry Asset Management Limited told investors via an email. Trades have been moving both sides of the international market for sovereign Eurobond assets amidst unclear outlook about rates, and inflation conditions.
As the ongoing positive reforms send hope signals about an economic resurgence in the year, foreign investors rally on Nigeria’s US dollar bonds. The bullish trend resulted in a 0.01% decline in the average yield to close at 9.91%.
The expected US Fed rate cut has been pointed out as one of the monetary actions that will reset market direction in the second half of 2024. The yield on the US 10-year Treasury note steadied at 4.28% on Friday, after climbing by 19bps this week and holding at high levels not seen since late February.
Traders brace for the Fed’s monetary policy decision next week, with the central bank expected to keep the Fed funds rate steady although investors will scrutinize new economic projections and any further clues on when the Fed will start cutting interest rates.
Currently, there is a 57% chance of a 25bps rate cut in June, but traders are growing more confident that any cuts will likely occur later in the year, especially after recent consumer price index (CPI) and producer price index (PPI) data exceeded expectations.
We expect both the US Federal Reserve and ECB to cut rates three times, by a total of 75bp, by year-end”, Fitch Ratings projected in a commentary note.
