…as geopolitical tensions undermine confidence in US treasuries
The Nigerian Eurobond market has shown early signs of recovery as almost every Nigerian bond is now in green, with some prices rising, bouncing back from the global sell-off seen on Tuesday due to geopolitical tension.
According to data seen by BusinessDay as at 12 noon, the longest-dated bonds and highest-yielding bonds saw the strongest recovery as buyers rushed back in 2034 Bond price rose by +0.500, bringing its offer price to approximately 116.75, the 2049 bond also jumped by +0.500, recovering nearly all the ground it lost during the global sell-off, and the 2051 bond increased by +0.375.
The average yield of Nigeria’s Eurobond, also dropped to 7.12 percent from 7.26 percent yesterday and 7.14 percent on Monday
Yesterday, the US, Europe, Japan, and other countries saw major sell-offs in their bond markets as Trump’s plan to impose levies on selected European nations as part of a bid to acquire Greenland has revived questions about the unpredictability of his policies and their desirability for global investors. Many investors moved to safe havens like Gold, which hit a record high yesterday, exceeding $4,800 per ounce.
Read also: Nigeria’s Eurobonds defy rising insecurity
Similarly, almost all of Nigeria’s Sovereign bonds showed a negative change in prices, ranging from -0.125 to -0.625, indicating that investors were selling off Nigerian Eurobonds, causing their market prices to fall.
“African Eurobonds traded bearish amid elevated U.S. Treasury yields and global uncertainty. Nigerian Eurobonds saw yield expansion across the curve, resulting in modest losses and a 5 basis points rise in average benchmark yields,” Analysts at AIICO Capital said in its daily financial markets report.
The largest price drop (-0.625) is on the longest-dated bond (maturing in 2051), which is typical as longer-term bonds are more sensitive to interest rate changes.
US Treasurys and other countries’ government bonds continued to sell off on Tuesday, as the White House’s rhetoric on tariffs fueled fresh fears of a trade war between the U.S. and Europe.
European countries hold trillions of dollars of US bonds and stocks, some of which sit with public sector funds. That’s fueling speculation they may offload their holdings in response to Trump’s renewed tariff war, potentially driving borrowing costs up and equities down, given US reliance on foreign capital.
Yields on bonds issued by the governments of France, Italy, Switzerland, and Australia also ticked higher on Tuesday.
Similarly, Japan’s yields hit a record high, as investors worried that proposed cuts to the food sales tax could worsen the country’s fiscal position.
The long-dated yield rose nearly 3 basis points to 4.213 percent, the highest level since the 40-year maturity was introduced.
Yields on shorter maturities climbed sharply as well.
Nigeria’s Eurobonds are priced in US Dollars. When the safe US Treasury starts paying more interest (higher yield), investors demand a much higher return to hold a riskier Nigerian bond. To get that higher yield, the price of the Nigerian bond must fall, which was seen in the prices of Nigeria’s bonds yesterday.
The bonds maturing in 2049 and 2051 show the biggest price drops (up to -0.625). This is because the global sell-off yesterday was led by long-dated debt.
When investors are scared about the future, specifically long-term inflation or debt, they dump the 20- and 30-year bonds first. Nigeria’s long-term debt simply followed the global herd.
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