Foreign investors boost Nigerian Eurobonds’ February rally

Nigeria’s Eurobond market closed the month of February in positive territory, signalling sustained foreign investor confidence.

According to data from the Debt Management Office (DMO), the average yield on Nigeria’s Eurobonds closed at 8.80 percent, 41 basis points down from 9.21 percent at the beginning of February, a signal of strong investor appetite.

In the Sub-Saharan African Eurobond market, yields also fell by 27bps to an average of 8.4 percent, which means Nigeria outperformed the region.

Analysts at Afrinvest said that this was because the region continued to attract interest amid improving macroeconomic dynamics and lower interest rate pivots.

“Kenyan bonds led gains, with yields dropping 49bps following announcement of plans to introduce a centralized bond reporting system. Following suit was the Nigerian Eurobond,” it stated in its monthly report.

This monthly gain occured despite seeing a bit of sell-offs last week, which led to a slight increase to 8.80 percent from 8.79 percent the previous week.

Analysts at CSL said that the drop in yield is largely influenced by global risk-off trends, geopolitical uncertainties, and key economic data releases.

Read also: Nigerian Eurobonds rally in February on sustained foreign interest

“In the U.S., Q4 GDP growth came in at 2.3 percent, in line with expectations, while jobless claims unexpectedly rose to 242 thousand (vs. 222 thousand forecast), fuelling concerns over labour market softness,” CSL analysts said in a note to investors.

These developments contributed to cautious trading in emerging market assets, including Nigerian Eurobonds.

Like Nigeria, Ivory Coast saw an increase in its yields across all of its bond tenors showing large sell-offs.

However, countries like Kenya and South-Africa continued to tow the bullish path.

The yield on Kenya’s 2028 bond decreased by 0.44 percent, same as the Kenya’s 2048, which declined by 0.06 percent, showing investors interest.

Similarly, Benin Republic’s 2038 Eurobond and South Africa’s 2041 Eurobond also saw declines in their yield.

Looking ahead, analysts at Afrinvest anticipate that the market will perform well, driven by strong liquidity inflows from coupon payment of N642.6billion and maturities of N562.5 billion.

“Additionally, a dovish interest rate outlook should reinforce the bullish bias. In the SSA market, the hunt for yield is likely to remain a dominant theme for sustained offshore interest in the region,” it said.