Nigeria’s Eurobond market closed February positively with average yields at 8.80%, reflecting strong foreign investor confidence. The Sub-Saharan market showed an overall decline, with Nigeria outperforming at this yield. Analysts attribute the yield drop to favorable conditions and global trends, while predictions remain optimistic for continued foreign interest.
In February, Nigeria’s Eurobond market demonstrated resilience, closing positively due to robust foreign investor confidence. Data from the Debt Management Office reveals that the average yield on Nigeria’s Eurobonds dropped to 8.80 percent, a decline of 41 basis points from 9.21 percent at February’s outset, indicating heightened investor interest. Comparatively, the Sub-Saharan African Eurobond market saw an average yield decrease of 27 basis points to 8.4 percent, showcasing Nigeria’s superior performance in the region.
Afrinvest analysts noted that improving macroeconomic conditions and a downward shift in interest rates enhanced regional appeal, particularly highlighted by Kenya’s bond market, where yields dropped significantly after the announcement of a centralized bond reporting system. Despite some sell-offs last week, Nigeria’s Eurobond yields remained relatively stable, rising slightly to 8.80 percent from 8.79 percent the prior week.
CSL analysts attribute the drop in yield to global risk-off sentiments and broader geopolitical uncertainties, alongside critical economic data. Notably, the U.S. reported a fourth-quarter GDP growth rate of 2.3 percent, aligned with expectations, although an unexpected rise in jobless claims caused concern regarding labor market conditions, contributing to cautious trading in emergent markets including Nigerian Eurobonds.
Unlike Nigeria, Ivory Coast experienced an increase in yield across all bond tenors, indicating significant sell-offs, whereas Kenya and South Africa exhibited continued bullish trends. Kenya’s 2028 bond yield decreased by 0.44 percent and the 2048 bond by 0.06 percent, reflecting strong investor confidence. Furthermore, the 2038 Eurobond of Benin Republic and South Africa’s 2041 Eurobond also showed yield declines, signifying optimism in those markets.
Looking ahead, Afrinvest projects positive market performance fueled by substantial liquidity inflows from N642.6 billion in coupon payments and N562.5 billion in maturities. A favorable interest rate outlook is expected to further bolster market optimism, with sustained offshore interest driven by the pursuit of yield prevailing in the SSA market.
In summary, Nigeria’s Eurobond market showcased a commendable rally in February, fostering confidence among foreign investors through declining yields and favorable macroeconomic developments. Supporting factors included strategic movements in the regional bond markets and prudent liquidity forecasts. As analysts remain optimistic about future trends, the focus on yield is projected to entice ongoing foreign interest in Nigeria and its neighboring markets.
Original Source: businessday.ng
