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With less than a 3.5% yield on US 10-year Treasury bills, foreign investors consummated some transactions around the Nigerian curve in the Eurobond capital market amidst a 25 basis points interest rate hike in the United States.
Nigeria’s Eurobond price rose across maturities as foreign investors increase their position in debt instruments denominated in United States dollars. Consequent to higher demand, prices spiked and yield slumped but analysts said there will be a sell-down after investors weigh the Fed interest rate hike.
Following a long inflation fight, the US Fed Reserve slowdown hawkish tone with a marginal increase in fund rates by 25 basis points to 5 and 5.25%, a level seen last in 2007.
Interest rate hikes in the US and other AAA+ rated sovereigns triggered a flight to safety as investors seek to hedge their position against the rising global inflation rate.
Top Africa countries have recorded outflows of foreign investors as central bankers across the world kick started monetary policy tightening, which pushed average interest rates in various markets higher.
Nigeria’s president-elect is expected to be sworn in on May 29 amidst concern but on the positive side, the market is generally expecting some reforms that could reset the macroeconomic indices.
Specifically, even while fed fund rates rose, market analysts observed that foreign portfolio investors (FPIs) submitted heavy bids on short-dated papers.
The foreign investors were noted to be positive with expectations, thus expanding their appetites for the Nigerian curve. Market analysts at TrustBanc Capital said in a report that the Jul-23 maturities dipped sharply by 130 basis points on the back of heavy demand seen in the international debt capital market.
Accordingly, the average benchmark yield shed 9 basis points to close at 12.93%. Elsewhere, the 10-year US Treasury yield held firm at 3.44% as investors weigh Fed’s rate hike.
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