Nigerian Eurobonds Experience Positive February Rally Driven by Foreign Investment
Nigeria’s Eurobond market closed February on a positive note, with yields decreasing to 8.80 percent, down 41 basis points. The trend indicates strong foreign investor confidence amid improving macroeconomic conditions. Analysts expect continued positive performance due to significant liquidity inflows and a dovish interest rate outlook.
In February, Nigeria’s Eurobond market exhibited a positive trend, reflecting sustained confidence among foreign investors. Data from the Debt Management Office (DMO) indicates that the average yield on Nigeria’s Eurobonds decreased to 8.80 percent, down 41 basis points from 9.21 percent at the month’s start, suggesting robust investor appetite.
In the broader Sub-Saharan African Eurobond market, average yields fell by 27 basis points to 8.4 percent, indicating Nigeria’s superior performance within the region. Analysts at Afrinvest attributed this positive trend to improving macroeconomic conditions and lower interest rate pivoting, which drew significant interest to the region.
Notably, Kenyan bonds experienced the most significant gains, with yields declining by 49 basis points due to proposed plans for a centralized bond reporting system, subsequently benefitting Nigerian Eurobonds. Despite some sell-offs last week that slightly increased yields to 8.80 percent from 8.79 percent, the market retained overall gains.
Analysts at CSL noted that the yield drop was influenced by global risk-off trends and ongoing geopolitical uncertainties paired with critical economic data releases. For instance, U.S. Q4 GDP growth was reported at 2.3 percent, aligning with expectations, while an unexpected rise in jobless claims raised concerns about labor market strength.
Such factors contributed to cautious trading in emerging market assets, including Nigerian Eurobonds. Unlike Nigeria, Ivory Coast faced rising yields across its bond tenors due to significant sell-offs, whereas countries like Kenya and South Africa continued their upward trajectory with increased investor interest leading to decreased yields.
Looking ahead, Afrinvest analysts project a positive performance in the Eurobond market, fueled by anticipated liquidity inflows from coupon payments totaling N642.6 billion and maturities of N562.5 billion. Furthermore, a dovish outlook on interest rates is expected to bolster this bullish sentiment, as the ongoing search for yields continues to attract sustained offshore interest in the region.
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In summary, the Nigerian Eurobond market has shown resilience in February, with decreased yields reflecting strong foreign investor confidence and improved macroeconomic conditions. The overall optimism is supported by liquidity inflows and a favorable interest rate outlook, indicating a continued interest in the region’s assets. Overall, analysts foresee a promising landscape for Nigeria’s Eurobonds amidst the evolving global economic situation.
Original Source: businessday.ng
