Eurobond rally driven by mid-term bets as investors shun near-term risk

Nigeria’s Eurobond market extended its bullish momentum this week, with average yields declining by 6 basis points to 6.89 percent from 6.96 percent, as renewed investor demand lifted prices across maturities.

The drop in yields signals a strengthening appetite for Nigerian sovereign debt in the international market, as investors increased purchases of existing bonds, pushing prices higher and borrowing costs lower for the government.

Buying interest was spread across the curve but was most pronounced in the mid-section, reflecting stronger demand for medium-term instruments.

Bonds such as the January 2031, February 2032, and February 2038 maturities recorded yield declines of 14 basis points, 12 basis points, and 11 basis points, respectively, highlighting a clear investor tilt toward mid-tenor exposures.

However, the trend was not entirely uniform. Shorter-dated instruments showed signs of pressure, with the September 2028 bond posting a mild yield increase of 2 basis points, suggesting some caution around near-term risk.

“The Eurobond market extended its bullish momentum into this week, as average yield fell by 6bps to 6.89 percent from 6.96 percent previously,” analysts at Meristem Securities Limited said, noting that “buying interest was spread across the curve,” with stronger demand observed in mid-tenor bonds such as Jan-31, Feb-32, and Feb-38.

Analysts at CSL Stockbrokers also pointed to improving global sentiment as a key driver. “The Nigerian sovereign Eurobond market recorded a broadly positive performance, with yields declining across the curve,” CSL said, attributing the movement to easing geopolitical tensions in the Middle East.

According to the firm, a temporary ceasefire involving the United States, Israel, and Iran has helped stabilise the Strait of Hormuz and raised expectations of a potential de-escalation, supporting investor confidence and driving renewed interest in emerging market assets.

Akintayo Popoola, an investment analyst, said sentiment toward Nigeria is improving, driven largely by higher oil prices which have strengthened the country’s fiscal outlook. According to him, the positive backdrop, combined with a softer U.S. dollar and expectations of a less aggressive Federal Reserve, has supported renewed demand for Nigeria’s Eurobonds despite lingering geopolitical risks.

Victor Ogundijo, fixed income analyst at CardinalStone Partners, said movements in the market were also tied to developments in global oil markets. He noted that stalled progress in talks between the United States and Iran pushed oil prices higher, boosting the performance of Eurobonds issued by oil-exporting countries such as Nigeria and Angola.

“Consequently, oil prices drifted higher, making Eurobonds of Nigeria and Angola gain and outperform within the Africa credit space, while oil-importing countries like Egypt and Kenya saw declines,” he said.

The concentration of demand in mid-tenor bonds suggests investors are taking a more balanced position, avoiding short-term uncertainty while remaining cautious about long-dated risks.

Market analysts say the concentration of demand in mid-tenor bonds suggests investors are taking a more balanced position, avoiding short-term uncertainty while remaining cautious about long-dated risks.

The movement highlights that Nigeria’s recent gains in the Eurobond market are being supported largely by external factors rather than a significant shift in domestic fundamentals.

While falling yields offer short-term relief, the reliance on global sentiment leaves the market exposed to potential reversals should external conditions change.