Foreign portfolio investors reduced their Nigerian Eurobond holdings, causing yields to rise amidst a risk-averse sentiment. The CBN maintained its Monetary Policy Rate to assess previous hikes’ effects on the economy. Global economic downturns, driven by lower job growth and oil prices, have contributed to bearish market sentiment.
Foreign portfolio investors (FPIs) have reduced their holdings in Nigeria’s sovereign Eurobonds as market sentiment turned risk-averse. Investors have been evaluating key developments within Nigeria alongside global market trends, contributing to a bearish outlook. This shift in sentiment has resulted in increased yields for Nigeria’s Eurobonds in the international market.
During its February meeting, the Central Bank of Nigeria (CBN) opted to maintain its Monetary Policy Rate (MPR) steady, aiming to observe the impact of previous rate changes on the economy. According to Erad Partners Limited, this cautious approach intends to preserve market stability while allowing the effects of prior tightening to permeate the economy without introducing further volatility.
Despite optimism stemming from potential tariff relief under President Trump, the U.S. economy has faced challenges recently, with a notable contraction in economic indicators heightening concerns. On a specific day in February, investors engaged in routine profit-taking in the Eurobond market, resulting in an increased average mid-yield of Nigerian Eurobonds by 5 basis points to 9.02% amid substantial selling pressure.
Analysts have identified a persistent negative sentiment in the market, particularly affecting shorter-dated bonds, such as those maturing in November 2025. This bearish sentiment is expected to continue unless favorable conditions arise either internationally or domestically, suggesting ongoing concerns regarding various economic indicators.
In February, significant shifts in the global fixed-income market were observed, influenced by monetary policy changes, geopolitical tensions, and concerns over economic growth. CardinalStone Partners Limited revealed that bond yields in numerous major economies declined, tracking movements in U.S. Treasury bonds, which fell to 4.2%, representing a significant decrease since December 2024. Investors have begun to recalibrate their portfolios in light of weakening economic data, including evidence of potential softening in the manufacturing sector.
In summary, the reduction in Nigerian Eurobond holdings by foreign portfolio investors is indicative of a broader risk-off sentiment in the market. The Central Bank’s strategy to maintain stable interest rates aims to foster market steadiness amid uncertain economic indicators. The increase in yields for Nigerian Eurobonds reflects ongoing global market pressures, driven by geopolitical factors and economic uncertainties, suggesting that investor sentiment may require time to stabilize.
Original Source: dmarketforces.com
