Increasing Yields in Nigeria’s Eurobond Market Driven by Investor Caution
Nigeria’s Eurobond yields have risen as foreign portfolio investors reduce holdings amid a risk-off sentiment influenced by global market conditions. The Central Bank of Nigeria’s decision to keep the Monetary Policy Rate unchanged aims to stabilize the economy. The market has shown selling pressure amidst drops in oil prices and disappointing job reports from the U.S., leading to bearish sentiments.
In recent developments, Nigeria’s Eurobond yields have risen as foreign portfolio investors (FPIs) reduced their sovereign Eurobond holdings in the international market due to a risk-off sentiment. The bearish sentiment among foreign investors is influenced by their reassessment of key developments within the Nigerian market against global market conditions.
The Central Bank of Nigeria (CBN) maintained its Monetary Policy Rate (MPR) and other key parameters unchanged during its February meeting. This decision reflects a cautious approach as the CBN evaluates the impact of prior rate hikes on the economy, aiming to prevent shocks that could disrupt market stability while allowing previous tightening measures to permeate the financial system, according to Erad Partners Limited.
Meanwhile, the U.S. economy has encountered challenges, particularly with a protectionist approach adopted by President Donald Trump, which has raised concerns among investors. On Wednesday, profit-taking was noticeable in the Eurobond market as investors strategically offloaded their holdings, though this activity was tempered.
The Eurobond market initially experienced a rebound amid optimism regarding potential tariff relief under President Trump. However, negative sentiment prevailed following a drop in oil prices and a disappointing private-sector jobs report that intensified worries regarding economic growth. According to ADP data, only 77,000 job additions were recorded in February, significantly lower than anticipated.
Overall, Nigeria’s average mid-yield for Eurobonds increased by 5 basis points to 9.02%, with evident selling pressure across the yield curve, particularly affecting shorter maturities like the Nov-25 bond. Market analysts predict that the negative sentiment will continue unless favorable developments emerge locally or internationally.
February brought considerable volatility in the global fixed-income market, driven by monetary policy changes, geopolitical worries, and growth concerns. CardinalStone Partners Limited noted a decline in bond yields across major economies, reacting closely to trends in U.S. Treasury bonds, with the 10-year Treasury yield falling to 4.2%, its lowest since early December 2024.
In conclusion, Nigeria’s Eurobond market is experiencing increased yields as foreign portfolio investors retreat due to a heightened risk-off sentiment, influenced by global economic uncertainties and unfavorable local developments. The Central Bank of Nigeria’s decision to maintain its MPR reflects a cautious stance, while significant drops in oil prices and disappointing U.S. employment data exacerbate investor concerns. Analysts anticipate ongoing negative sentiment without positive change in the market.
Original Source: dmarketforces.com
