The impact of the US Fed rate cuts on debt asset portfolio returns in the international capital market continues to be felt, with Nigeria’s sovereign US dollar bond trading below 10% experiencing a surge in the market. This surge has caused uncertainties among investors, leading them to rebalance their portfolios.
Foreign portfolio investors are quickly adjusting their positions, resulting in a selloff of Nigeria’s sovereign Eurobond in the market. However, fixed income experts with global coverage believe that in the coming months, there will be an improved appetite for Nigeria and other African Eurobonds.
Yesterday, investors offloaded Nigeria’s US dollar bonds across various maturities, putting pressure on the short, mid, and long ends, which led to an average yield increase to 9.75%, according to Cowry Asset Limited. The recent 50 basis points rate cut by the US Fed is expected to increase flows of hot money into African markets, with the main goal being optimized returns.
Top African countries with high yields on sovereign assets are likely to attract more foreign portfolios, especially as the US market prices in rate adjustments. Selling pressure in the African Eurobonds space has been persistent, with selling interests observed across Nigeria, Angola, and Egypt, according to fixed income analysts at AIICO Capital Limited.
The mid-yield across the Nigerian curve has seen an average increase. Market focus is expected to shift to the PMI data this week, followed by the Fed’s preferred inflation measure, as stated by AIICO Capital. In other news, the yield on the 2-year Treasury note rose slightly to 3.576%, and the yield on the 10-year Treasury note increased by 1.3 basis points to 3.740%. The yield on the 30-year Treasury bond also rose by 1.3 basis points to 4.083%.
Overall, the rise in Nigeria’s sovereign Eurobond yield to 9.75% has been driven by the actions of foreign portfolio investors and the impact of the US Fed rate cuts. As the market continues to react to these developments, it is important for investors to monitor the situation closely and adjust their portfolios accordingly to navigate these changing market conditions.