Nigerian yields attractive among JPM GBI – EM index universe

Nigerian bonds still sport one of the highest yields among countries in the JPM EM bond index making them attractive for carry traders even after compression in recent months due to excess liquidity.

Overseas funds are buying Nigerian sovereign bonds, as the extra-yield they demand to hold the notes over US Treasuries continue to be one of the widest in the emerging markets space.

Nigerian benchmark bonds due January 2022 had a yield of 12.01 percent on Friday (August 0), the second highest among the 18 member JPMorgan Emerging market bond index (GBI – EM).
This compared with 2.37 percent for U.S Treasuries, 8.02 percent for Indonesian debt, and 3.89 percent for Malaysian bonds.
The naira (NGN) is defying analyst’s outlook for devaluation as it climbed to the strongest levels versus the dollar (USD) in almost three months last week amid a rebound in the carry trade.

Carry trades occur when investors seeking higher yields borrow in a country with low interest rates and park funds elsewhere.
Nigeria’s inflation reached 8.2 percent in June, within the Central Bank’s target range of 6 – 9 percent.