South Africa, Ghana instruments overtake Nigerian sovereign bond returns

Compared with eight per cent  average year-to-date (YTD) return of the Nigerian sovereign bond instruments, the republic of South Africa and republic of Ghana instruments have overtaken the Nigerian sovereign bond instruments in the Eurobonds market  with average YTD return of +12.6 per cent  and +9.0 per cent respectively.

This is contrary to last month when the Nigerian sovereign bonds instruments commanded the highest year to date (YTD) return, investment bankers at Afrinvest West Africa Limited have revealed.

Finance experts frown at low or negative bond yield territory because it means that investors are so concerned about the economy that they are looking for safety. It can also be a sign that investors are so worried about stagnation or recession that their primary focus is on the safe return of their capital—that is, making sure they can simply get it back—not even earning big returns on their invested money.

In the Eurobonds market, Nigerian Eurobonds continued to witness buy sentiment. Consequently, yields on the JUL 2023 and JAN 2021 Eurobonds declined 0.1 per cent apiece week-on-week (W-o-W) whilst the JULY 2018 instrument closed flat.

Meanwhile, the Debt Management Office (DMO) is scheduled to auction N40 billion of a new issue – JULY 2021 instrument – and N40 billion each of the JAN 2026 and MAR 2036 bond instruments at its monthly bonds auction on Wednesday. Trading sentiment in half year (H1):2016 was mostly guided by heightened inflationary pressure and foreign exchange risk factors; however, dealers expect the moderation in foreign exchange related risk to spur foreign investors’ interest in Nigerian assets in H2:2016 which could offset the tendency of domestic investors to price-in inflation risk.

Nonetheless, “the aggressive play of the Central Bank of Nigeria (CBN) in liquidity management after the return to a more market-friendly foreign exchange regime could anchor yields upward in the immediate term,” the company stated in a note to investors.