The Nigerian Eurobond market continued on its positive stride this week as global trade fears eased amid buying interest from a ratings upgrade.
According to data from the Debt Management Office (DMO), the average yield on Nigerian Eurobonds dipped to 10.41 percent on Tuesday from 10.57 percent in the same period last week.
At the peak of the sell-offs witnessed for weeks, the average yields on Nigerian Eurobonds hit 11.37 percent on April 7.
“Buying interests resurfaced across the curve as investors took advantage of attractive price levels,” analysts at Meristem Securities said in its weekly report.
The buying interest was driven by NOV-27, MAR-29, SEP-28, and NOV-25 papers, which recorded the most significant yield declines.
Analysts at CSL Stockbrokers said that the Eurobond rally was driven by improved investor appetite from emerging market assets, buoyed by firmer commodity prices and Fitch’s recent upgrade of Nigeria’s credit rating from ‘B-’ to ‘B.’
Read also: Nigeria Eurobonds tumble as Trump tariffs trigger turmoil
“Despite this momentum, market sentiment remains fragile, as lingering global uncertainties could temper further gains in the near term,” CSL Stockbrokers said.
While yields have ticked lower since then, they still remain elevated.
The Nigerian Eurobond market started the year on a good note, with lots of buying interest driving yields to as low as 8.79 percent. However, the global tariff war has robbed it of all its earlier gains.
In just a few sessions, yield on the 10-year Treasury soared to 4.592 percent on Friday, the highest since February. Last week’s selloff was a result of global trade tensions escalating. This led to broad rises across the curve, pushing the average benchmark yield up.
The U.S. Treasury market over the past week saw investors fleeing the safe haven, in an unusual move that added to the market turmoil caused by U.S. President Donald Trump’s ‘reciprocal’ tariffs, forcing him to suspend the duties.
If the upheaval caused by US President Donald Trump’s trade war continues, leading to continued higher yield spreads, it will be difficult for sub-Saharan African nations to issue new eurobonds.
However, hopes for an end to the global tariffs are in sight as Trump this week that he plans to be ‘very nice’ to China in any trade talks and that tariffs will drop if the two countries can reach a deal.
This is a sign he may be backing down from his tough stance on Beijing amid market volatility.
The International Monetary Fund (IMF) said that the drop in demand for Nigeria’s oil poses a challenge to the nation’s revenue and thus the sovereign risk of Nigeria.
Jason Wu, assistant director, monetary and capital markets department, IMF, said: “Nigeria’s sovereign spreads have increased in recent weeks, due to lower global demand for oil, which will weigh on its revenue. These will make investors vigilant.”
Nigeria’s sovereign spread refers to the difference in yield between Nigerian government bonds (usually denominated in US dollars, known as Eurobonds) and comparable US Treasury bonds. It is a key indicator of the risk premium that investors demand to hold Nigerian debt instead of the safer US government debt.
African governments are facing the prospect of being shut out of global bond markets, as tariff turbulence forces investors to dump riskier assets.
