‘Nigerian Corporate Eurobonds trade negative’

There are indications that performance across the Nigerian Corporate Eurobond was broadly negative last week as sell sentiment prevailed week on week (W-o-W) investment bankers have revealed over the weekend.

This occurred across all Corporate Eurobonds but FIDELITY 2018.  Yields on FBNHoldings 2020 (+2.3 per cent), FBNH 2021 (+0.45 per cent) and ZENITH 2022 (+0.15 per cent) rose the most. DIAMOND 2019 has the highest price return (26.3 per cent) YTD.

The FBNQuest, an investment arm of First Bank Nigeria said it  expects sentiment to stay moderate this week as the gains from last week’s improvement in commodity prices are expected  to sustain bullish momentum in the Sub-Saharan Africa (SSA) Eurobonds market.

Meanwhile, the Debt Management Office (DMO) previous week announced plans to raise US$2.5 billion mid-November. This will come from the sale of Eurobonds, with perhaps an element of diaspora paper to bulk out the exercise.

This is expected to cover the greater part of the projected external financing of N1.07 trillion (US$3.5 billion) in the 2017 budget. Experts are expectant that the FGN is well placed to tap a receptive market, not least because its external debt at end-June amounted to just 3.9per cent of estimated 2017 Gross Domestic Product (GDP).

The DMO has a medium-term target of 60/40 for the blend of its domestic and external obligations. The ratio stood at 72/28 at end-June. If we add the Eurobond issuance plus the FGN’s proposal to  convert maturing NTBs into short-term USD instruments up to a ceiling  of US$3 billion, we arrive at a ratio of about 65/35.