Nigeria’s sovereign Eurobonds extended their recovery last week as renewed investor demand pushed yields lower, signalling improving sentiment towards the country’s credit despite persistent global uncertainties. Falling yields indicate rising bond prices as investors increased their holdings of the country’s dollar-denominated debt.
According to Meristem Securities, average yields on Nigerian Eurobonds declined by 4 basis points to 6.95 percent from 6.91 percent in the previous week, reflecting renewed investor appetite for Nigerian sovereign credit following a recent uptick in yields.
The rebound followed a weaker outing the previous week when average yields climbed nine basis points to 6.96 percent after renewed geopolitical tensions in the Middle East and expectations of higher-for-longer global interest rates triggered a selloff across emerging market debt.
According to Meristem, demand during the week was concentrated on the 28-November-2027, 23-February-2038, and 28-September-2051 sovereign Eurobonds, with yields on the three maturities declining by eight, five, and four basis points, respectively.
The investment firm said the buying interest suggests investors returned to Nigerian sovereign debt after the recent rise in yields created more attractive entry levels. “The Nigerian Eurobond market reversed the previous week’s bearish trend, suggesting renewed investor appetite for Nigerian sovereign credit following the recent uptick in yields”.
CSL Stockbrokers attributed the improved performance to growing optimism around Nigeria’s macroeconomic outlook, supported by firm international crude oil prices and sustained investor appetite for higher-yielding emerging market assets.
“The bullish sentiment likely reflected investors’ optimism around improving domestic macroeconomic fundamentals and firm crude oil prices, alongside sustained investor appetite for higher-yielding emerging market debt.”
The firm explained that the combination of improving domestic fundamentals and favourable oil prices helped offset concerns about global market risks.
The previous week’s selloff had reflected a shift in investor preference towards US fixed-income assets as higher oil prices reinforced expectations that major central banks, particularly the US Federal Reserve, could keep interest rates elevated for longer. That reduced demand for emerging market Eurobonds, including Nigeria’s.
Looking ahead, CSL Stockbrokers said further yield compression could moderate as investors access global risk developments and take profits following the recent rally.