In the international debt market, the average yield on US dollar bonds or Nigerian government Eurobonds decreased little as foreign portfolio investors (FPIs) expanded their holdings.
Cowry Asset Management Limited stated in a report on Thursday that the market for government Eurobonds was doing well, with purchasing interest especially in the NOV-25, SEP-38, and FEB-30 maturities, whose yields had dropped by 4 basis points apiece.
As a result, the average yield on US dollar bonds issued in Nigeria decreased by 3 basis points to 9.80%.Foreign investors reacted to the European Central Bank’s (ECB) interest rate drop, according to analysts and traders of fixed-interest instruments.
For the first time in roughly five years, the ECB slashed rates to drive growth in the Eurozone. There is expectation that the US Fed will also follow the same line, which could reverse global central bankers’ hawkish stance.
The ECB said Thursday that it would reduce its key interest rate to 3.75% from 4%, its first rate cut in almost five years. Future interest-rate decisions will be based on incoming economic data, the bank said in a statement.
The high global interest rate drove out hot money from African markets. Nigeria saw the exit of foreign portfolio investors due to highly competitive rates on debt assets elsewhere.
The yield on the 2-year US Treasury was little changed at 4.723%, versus 4.728%. The yield on the 10-year US Treasury was at 4.29%, versus 4.289% on Wednesday. The yield on the 30-year Treasury rose less than 1 basis point to 4.445%, from 4.440% on Wednesday.
Meanwhile, trading activity on Federal Government of Nigeria (FGN) bonds ended on a calm note. In the secondary market, investors offloaded the MAR-25 FGN bonds and JAN-26 bond instruments.
Investors profit-taking activities dragged these bond yields downward by 2 bps and 1 bps, respectively. Despite this movement, the average secondary market yield remained unchanged at 18.73% from the last close, Cowry Asset said in its market update.
