When foreign asset managers’ risk-off mentality causes portfolios to rebalance, the average yield on Nigeria’s US dollar bonds broke through 10%, a level of resistance that had been there for a while.
Foreign investors sell down their holdings during the midweek trading session on the international capital market due to their unfavorable opinion of Nigeria’s macroeconomic performance and the country’s unpredictable economic market path.
The apex bank rates on Treasury bills are progressively declining, but inflation in Nigeria has gone red. The authority has scheduled domestic US dollar bonds for June in an effort to lessen the market’s FX illiquidity.
There are still few details regarding the proposal, and some experts believe the government may abandon it in light of recent World Bank inflows of $2.25 billion and the latest payment from an oil-backed credit agreement that Nigerian National Petroleum Company Limited inked with Africa Import-Export Bank.
Foreign and local banks that were interested in Nigeria’s bonds denominated in US dollars have boosted their exposure to the sovereign bonds on the international market.
Nigeria’s competitiveness in the global market compared to the single-digit yield on US Treasury notes in the secondary market has kept Nigeria’s Eurobond yield muted, moving below 10%.
The sovereign Eurobonds market was predominantly bearish across maturities, thus pushing the average yield higher by 18bps to 10.19%, Cowry Asset Management Limited told investors via email.
Elsewhere, the US Treasury’s 20-year auction hit a high yield of 4.452%, down from the 4.635% high in the previous auction. The 10-year US Treasury yield falls 0.061 percentage point to 4.216% and the two-year loses 0.058 percentage point.
The 2-year US Treasury yield declined 0.058 percentage point to 4.701% today. The 30-year US Treasury yield declined 0.056 percentage point to 4.353% today.
In the local market, the fixed income market reversed its bearish trend in May 2024, buoyed by increased liquidity. The Nigerian Treasury Bills (NT-Bills) market ended the month on a bullish note, with the average yield dropping 48bps month on month to 21.72%, ARM Securities Limited said in its fixed income market update.
Similarly, the FGN bond market witnessed positive sentiment as the average yield fell by 25bps in May to 18.69%. Overall, the Naira fixed income market closed bullish, with average yields down 37bps month on month to 20.20%.
