Foreign investors have boosted their exposure to Nigeria’s Eurobonds as market sentiment has significantly improved due to the recent U.S. Federal Reserve rate drop of 0.25% to a range of 4.50%-4.75% and the results of the U.S. election.
Demand for Nigeria’s dollar-denominated bonds has increased across a range of maturities due to the high yields on these bonds. Investors hope that Nigeria’s position in the frontier market would soon be restored by the MSCI Index, which attributes this optimism in part to continuing reforms and better prospects for repatriation of assets.
Analysts noted buying pressure across the short, medium, and long ends of the yield curve, which caused the average yield to drop by 24 basis points to 9.31% by Friday. While the Eurobonds market experienced some volatility, Nigeria’s dollar bonds, along with African sovereign assets like Angola’s and Egypt’s, saw gains of up to $2.
The bullish sentiment was further bolstered by the Federal Open Market Committee’s (FOMC) rate cut, AIICO Capital Limited reported. Towards the week’s end, some profit-taking emerged after sustained buying interest.
As a result, the average mid-yield on Nigerian Eurobonds fell by 45 basis points to 9.3% week-on-week. AIICO Capital Limited anticipates mixed sentiments ahead, with potential profit-taking at the beginning of the week.
According to market reports, there was widespread purchasing activity in Nigerian bonds with an emphasis on mid-duration securities. According to TrustBanc Capital Limited, the outcome of the U.S. election indicates that further rate cuts may take place under the next government at a slower pace.
