.. As Sovereign Eurobond yield fips, FPIs raise bets
By Yahaya Umar
Gross balance in Nigeria’s foreign reserves climbed to $38.832 billion, according to data from the Central Bank ,CBN.
This week, Nigeria has seen $33.614 million addition into the external reserves, from $38.709 billion last week.
FX accretion into the nation’s reserves continue to make uptrend despite low oil production as OPEC latest report.
While the market cannot put figure on inflows related to oil sales in the FX reserves, analysts noted that the Apex Bank has been using OMO bills market to attract foreign portfolio investors.
Last week, the average yield for OMO bills rose by +214 bps to close at 25.9% after CBN auction. At the OMO auctions, the CBN offered the sum of N300 billion, but allotted N905 billion worth of OMO bills to market participants.
In its commentary note, Coronation Research said it appears that take-up by Foreign Portfolio Investors ,FPI, was strong. The CBN’s stop rate stood for 361-day OMO bills settled at 24.3%.
However, foreign portfolio investors ,FPIs, continued to position at the Nigeria’s sovereign Eurobond market, the average yield nosedived further while asset price surged.
The market anticipates the latest US Fed rate cut would pushed funds into African debt capital market,
But the hot monies have started flowing toward the Nigerian market already on the back of elevated yield on local and foreign currency borrowing instruments.
Foreign investors are taking advantage of Nigeria’s elevated yield on debt papers, and this is expected to persist until economic indicators improved.
In the local bond market, traders saw bearish trend for most of the day as yields continued to rise across the board.
There was selling interest in the Feb 2031 paper, but this was followed by renewed buying by investors looking to take advantage of its attractive yield. As a result, the average mid-yield settled at 19.30%.
Likewise, the Eurobonds market ended on a negative note as selling pressure affected the Nigeria and Angola bonds.
In Nigeria’s sovereign Eurobonds market, buy pressure across the short and mid ends of the yield curve resulted in a marginal decrease leading to an average yield of 9.32%, Cowry Asset Limited said.
However, there was good buying interest in the Egypt bonds due to positive developments such as reduced tensions in the Middle East and a mutual investment agreement with Saudi Arabia.
Oil prices declined following OPEC’s third consecutive reduction in its 2024 demand forecast. Brent prices dropped by 1.92% to $77.52, while WTI prices fell by 2.13% to $73.95.
Gold prices also softened as China’s extensive economic stimulus measures, the largest bullion consumer, did not boost investor confidence. Moreover, a rally in the U.S. dollar to two-month highs restricted the upward momentum, with gold reaching $2,665.80 per ounce.
