Yields on Nigeria’s U.S. dollar-denominated Eurobonds climbed to 10.36% as foreign investors trimmed their holdings in response to monetary policy developments in the United States and the United Kingdom.
Despite Nigeria’s recent repayment of a $3.4 billion IMF COVID-19 loan, investor sentiment remained cautious. Analysts noted that broader macroeconomic uncertainties and inflation concerns across African markets continue to weigh on bond performance.
According to Cowry Asset Management, a wave of investor selloffs drove bearish sentiment in the Nigerian sovereign Eurobond market, nudging average yields up to 10.36%. The firm said investor repositioning reflected caution ahead of key central bank decisions and inflation data.
Trading activity was initially muted due to a UK bank holiday, while strong U.S. services data eased recession fears but reinforced inflation concerns. Later in the week, rising crude oil prices and bargain hunting provided some support to African Eurobonds, as markets anticipated the U.S. Federal Reserve’s next move.
As expected, the Federal Open Market Committee (FOMC) held its benchmark interest rate steady at 4.25%–4.50% at its May 2025 meeting—the fourth consecutive pause. The Fed cited solid economic growth (excluding a Q1 dip in net exports) and continued strength in the labor market, though it flagged growing uncertainties and persistent inflation risks.
Cordros Capital noted that the Fed’s cautious tone suggests interest rates will remain unchanged in the near term, as policymakers assess incoming data and global economic conditions. Market expectations align with this view, with the CME FedWatch tool showing an 82.9% probability that rates will be held steady at the Fed’s June meeting.
Meanwhile, the Bank of England (BoE) opted for a modest 25-basis-point rate cut, bringing its benchmark rate to 4.25%. The 5–4 vote reflected divisions within the Monetary Policy Committee, as some members expressed concern over weakening growth and rising global risks, including new import tariffs.
Two committee members voted to keep rates unchanged, citing uncertainty around inflation in the services sector. Others warned that overly tight policy could stifle economic momentum, especially as the labor market shows signs of softening and wage growth slows.
Despite the cut, the BoE stressed that future policy decisions would remain data-driven. Cordros Capital said the rate is likely to remain at restrictive levels for now, with a potential further cut in the second half of 2025, depending on economic trends and inflation dynamics.
