In the midst of uncertainty, selloffs affected the Federal Government of Nigeria (FGN) Eurobonds on the global capital market. It was noticed that some international investors sought refuge in the Eurobond market last week as a result of market responses brought on by the publication of the Central Bank’s audited financial statement.
The 10-year, 6.50% NOV 28, 2027, the 20-year, 7.69% FEB 23 2038, and the 30-year, 7.62% NOV 28, 2047 bonds all sustained losses, according to an update from Cowry Asset Management Limited to investors.
According to the breakdown, selloffs cost the 10-year FGN Eurobond $10.51. Its yield increased as a result, climbing 135 basis points to 10.56%. Additionally, the price of the 20-year FGN Eurobond dropped by US$1.37, causing a 23 basis point increase in the yield that was printed at 11.07% on Friday.
Due to selloffs, the price of 30-year FGN Eurobond paper was reduced by US$1.39 at the end of the curve, while last week’s foreign market yield increased by 22 basis points to 11.09%.
Despite a reduction in U.S. inflation circumstances, foreign investors continue to expect better returns on investment money in the Eurobond market. The U.S. consumer price inflation data from last week revealed that, as predicted, prices increased by 0.2% on a monthly basis at both the headline and core (ex-food and energy) levels.
It was even better to two decimal places, at 0.17% and 0.16%, respectively, which meant that the headline inflation rate was 3.2% rather than 3.3% from 3% in June, according to a note from an ING analyst. Core inflation dropped from 4.8% to 4.7%.
Amidst uncertainties, FGN Eurobonds encountered declines across all tracked maturities, reflecting prevailing bearish sentiment, though the Debt Management Office (DMO) remains resolute about foreign capital amidst declining external reserves.
Data from the Central Bank showed that Nigeria’s gross external reserves remained under pressure due to lower accretion from the crude oil sales, most of which was swapped by the state oil corporation -NNPCL.
The import-dependent Africa’s largest economy saw its gross external reserves losing weight, dropping by US$44.41 million to US$33.88 billion, translating to six months of import cover, according to analysts.
“We expect currency pressures to remain intact in the near term, given current demand pressures and still frail FX supply despite the CBN’s abolishment of its multiple FX windows.
“On FX supply, we expect foreign investors to remain on the sideline in the near term as they continue to look for signals on market interest rates and solutions to the existing FX backlog and supply issues”, Cordros Capital Limited said in an update.
