International investors have increased their exposure to Nigeria’s Eurobonds amid improved market sentiment, driven by the recent U.S. Federal Reserve rate cut of 0.25% to a range of 4.50%-4.75% and U.S. election results.
High yields on Nigeria’s dollar-denominated bonds have attracted significant foreign interest, with demand rising across various maturities. This confidence is partly attributed to ongoing reforms and improved prospects for funds repatriation, with investors hoping the MSCI Index will soon restore Nigeria’s status in the frontier market.
Analysts noted buying pressure across the short, medium, and long ends of the yield curve, which caused the average yield to drop by 24 basis points to 9.31% by Friday. While the Eurobond market experienced some volatility, Nigeria’s dollar bonds, along with African sovereign assets like Angola’s and Egypt’s, saw gains of up to $2.
The bullish sentiment was further bolstered by the Federal Open Market Committee’s (FOMC) rate cut, AIICO Capital Limited reported. Towards the week’s end, some profit-taking emerged after sustained buying interest.
As a result, the average mid-yield on Nigerian Eurobonds fell by 45 basis points to 9.3% week-on-week. AIICO Capital Limited anticipates mixed sentiments ahead, with potential profit-taking at the beginning of the week.
Market reports indicated broad buying interest along Nigeria’s yield curve, with particular focus on mid-duration bonds. The U.S. election outcome suggests future rate cuts may proceed at a moderated pace under the new administration, according to TrustBanc Capital Limited.
