Nigerian Eurobonds have sustained their rally this year as large investors’ appetite drove average yields to 8.79 percent last week, the lowest this year, according to data from the Debt Management Office (DMO).
This was down from 9.03 percent in the previous week.
Buying interest was broad-based across all maturities, reflecting a sustained appetite for Nigerian sovereign bonds.
Below are three factors driving the
Fed’s quantitative tightening slowdown boosts Eurobond demand
Last week, the Eurobond market opened the week quiet due to a U.S. holiday. However, sentiment turned bullish following the release of the FOMC minutes, which indicated a slowdown in the Federal Reserve’s quantitative tightening program.
Uncertainty over how the U.S. Treasury will manage debt issuance over the next few months drove some Federal Reserve officials, at their last policy meeting, to contemplate slowing or pausing the ongoing drawdown of their balance sheet until greater clarity arrives.
MPC holding rates at 27.50 percent
Analysts at CSL Stockbrokers said in a report that the minutes from the Fed meeting overshadowed concerns about inflationary risks stemming from potential Trump-era tariffs.
“Additionally, Nigeria’s Monetary Policy Committee (MPC) decision to maintain the benchmark interest rate amid declining inflation further reinforced investor confidence, sustaining buying interest in Nigerian Eurobonds,” they said.
Last week the MPC held rates at 27.50 percent after the National Bureau of Statistics rebased inflation rate which led to a decline to 24.48 percent in January.
Yield on 10-year US Treasuries drops
The yield on the US 10-year Treasury note, which is considered the most secure instrument, saw little change around 4.4 percent on Monday, the lowest level since mid-December, as traders weighed President Trump’s trade policies, fresh economic data, and the outlook for monetary policy.
Olaolu Boboye, head of research at CardinalStone, said that yields declined across Nigeria and other SSA Eurobonds last week because yields moderated internationally as there is now a bit of clarity concerning Trump’s direction, especially about trades and tariffs.
Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy.(BusinessDay)
