Foreign Investors Drop Nigeria Eurobonds Holding, Yield Heats Up

DMO Set To Auction N150bn Bond On FG's Behalf

Foreign investors reduced their interest in Nigeria’s Eurobond market midweek due to global economic worries. Nigeria is going through a difficult period as key macroeconomic indicators continue to throw doubt on the success of government policies over the last year.

Inflation surged to 33.69% in April, and Broadstreet analysts expect the consumer price index to deteriorate further in the following months. Past GDP figures show that economic growth has slowed, while public debt has reached a decade-high.

The naira’s depreciation, along with the monetary policy’s inability to increase FX liquidity across the forex market, has harmed the local currency’s buying power. Political risk is low and manageable, but the economic picture is clouded by unpriced risk.

Today, the sovereign Eurobonds market sustained its negative sentiment, particularly in the FEB-38, NOV-27, and SEP-33 maturities, according to Cowry Asset Management Limited.

Due to selloffs on asset by foreign portfolio investors, the market recorded a marginal increase in the average yield to 9.78%. Elsewhere, the 10-year US Treasury yield rose 0.019 percentage point to 4.433% today. Yield is up four of the past five trading days.

Treasury yields remain above yesterday’s settle after the Fed minutes corroborate the narrative that upcoming data will determine future monetary policy moves. 

“Members agreed that they did not expect that it would be appropriate to reduce the target range until they have gained greater confidence that inflation is moving sustainably,” down to 2%, the minutes say.

“Participants assessed that demand and supply in the labor market, on net, were continuing to come into better balance, though at a slower rate” and they “noted that recent indicators suggested that economic activity had continued to expand at a solid pace.” The 10-year yield is at 4.432% and the two-year at 4.871%.

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