Market News

The yields on Nigerian Eurobonds climbed last week as foreign investors retreated in reaction to the United States’ Federal Reserve’s unchanged interest rates and a general move away from riskier assets.

The downturn was primarily driven by a sustained risk-off sentiment towards African assets and the Federal Reserve’s decision to maintain interest rates, which could have triggered capital flight to safer assets, according to analysts at Meristem.

As a result, the average Eurobond yield rose by seven basis points week-on-week, settling at 9.36 percent on Friday last week, from 9.29 percent in the previous week, according to data from the Debt Management Office (DMO).

Most of the sell-offs were seen on the mid-curve bond.

At last week’s meeting, the U.S. Fed maintained its benchmark interest rate at 4.25 percent to 4.50 percent.

“If the economy remains strong, and inflation does not continue to move sustainably toward 2 percent, we can maintain policy restraint for longer,” said Jerome Powell, Federal Reserve chair.

“If the labor market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can ease policy accordingly.”

After the Fed’s decision, the S&P 500, a stock market index tracking the stock performance of 500 leading companies, finished in the green on Friday and avoided four straight weekly losses.

Although the American stock market has regained its momentum, many investors are flocking to better-performing markets such as Europe and China due to uncertainty around Trump’s tariff policies.

Earlier in March, President Trump had signed an executive order increasing tariffs on Chinese imports from 10 percent to 20 percent. In response, China announced on the same day that it would impose additional tariffs on various U.S. agricultural products.

Specifically, a 15 percent tariff was levied on U.S. chicken, wheat, corn, and cotton, while a 10 percent tariff was applied to sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products.

Additionally, the U.S. administration’s consideration of new tariffs on Russia and trade negotiations tied to Iran’s nuclear program add to geopolitical uncertainty, which could impact global energy markets and investor confidence.

So far this year, the S&P 500 has lost 3.6 percent, while the Europe Stoxx 600 has gained 8.3 percent.

Investors are finding bargains nearly everywhere else. Markets around the world are trading at near-record discounts to the U.S., and the price-to-earnings ratio of companies in the Stoxx Europe 600, a stock index of European stocks over the past year, is around 18.7, while it is 24.6 for the S&P 500, according to Dow Jones Market Data. The Hang Seng Index’s ratio is less than 13.

Nigeria’s equities market is missing out on this run, as it experienced bearish sentiments most of this month, with a year-to-date return of 2.6 percent.

Despite all of this, analysts at CardinalStone project that Nigeria’s Eurobond will outperform its benchmark, given the country’s strong debt sustainability metrics and improving economic indicators.

“Moreover, we anticipate that Nigeria will tap into the Eurobond market this year to finance the $1.12 billion maturity and also bolster its declining external reserves,” a CardinalStone analyst said.