Nigeria US Dollar Bond Yield Increases Over Selloffs

In the international debt capital market, the average yield on Nigeria’s US dollar denominated bond climbed midweek as market fears spurred selloffs ahead of the presidential election tribunal’s final verdict.

Due to economic worries, international investors have been selling Nigerian assets, causing the market price of the Eurobond to fall just as the yield curve continues to trend upward, signaling rising interest rates.

According to financial analysts, Fitch Ratings’ recent assessment on the Central Bank of Nigeria’s (CBN) transparency difficulties about the country’s genuine external reserves position would raise interest rate expenses if the government needed to make eurobond calls. According to Fitch, Nigeria’s lower foreign reserves indicate external risk and policy problems for the country.

While the CBN certified report improved openness, the rating agency observed that there are still loopholes, making it impossible to establish Nigeria’s foreign reserves level. Fitch rates Nigeria’s foreign exchange reserves as having a transparency problem.

Fear dominated trading operations on Nigeria’s US dollar bond in the eurobond market, forcing financing costs higher, while fixed securities investors used election-related events to change their portfolio plans.

The electoral tribunal formally confirmed Nigerian President Bola Tinubu’s election victory, removing the activation of further burden on economic activities in the midst of suffering private sector activities. In the local bond market, FGN bond values remained stable for most maturities, with the average secondary market yield closing flat at 13.69%, according to Cowry Asset Management Limited.

Asset managers said notably, the 10-year, 20-year, and 30-year debts held steady at 14.33%, 14.97%, and 15.35%, respectively over lull activities in the market.

FGN Eurobonds remained bearish for most maturities tracked, with the average secondary market yield closing higher at 11.25%. Despite a broken economic position, analysts believe that reforms would drive buying momentum across the market as Nigeria keeps an eye on reform.

The 10-year US treasury yield rose 0.022 percentage points to 4.289%. The price fell as the yield jumped up for three consecutive trading days Treasury yields jumped to among the highest levels of this year on Wednesday after data showed the U.S. economy’s services sector continued to expand in August.

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