Nigeria’s Eurobond yields spike as Middle East conflict weigh on sentiment

The Nigerian Eurobond market is navigating a complex landscape of rising yields and shifting investor appetite.

The primary driver is a significant escalation in Middle East conflict, specifically following joint U.S.-Israeli operations targeting Iranian infrastructure, which has triggered a flight to safety globally.

The Eurobond yields edged higher across most maturities in the latest week, with the benchmark yield rising to 7.2 percent from 7.1 percent.

Yields rose slightly across most maturities in the week ending March 13, according to data from the Debt Management Office (DMO), as tensions in the Middle East affected investor sentiment.

Other bonds also recorded similar movements. The September 2028 Eurobond rose to 6.13 percent from 5.83 percent, while the March 2029 bond increased to 6.22 percent from 6.07 percent.

Read also: Nigeria Eurobonds extend losses as yields climb

The February 2030 and January 2031 bonds also moved up to 6.61 percent and 6.96 percent, respectively.

At the longer end of the market, yields remained higher. The January 2046, January 2049, and September 2051 Eurobonds were all trading around 8.4 to 8.5 percent, showing that investors still demand higher returns for longer-term bonds.

“The uptick in Eurobond yields over the last couple of days reflects a broad risk-off response to the tensions in the Middle East,” said Omobola Adu, a fixed income analyst at CSL Stockbrokers.

“We expect this sentiment to persist in the near term, but we see room for yield compression once tensions de-escalate,” he added.

In bond markets, an increase in yield usually means that prices have fallen slightly, as investors become more cautious.

The broad increase across different maturities suggests that the movement affected the entire market, not just a specific bond.

The latest increase follows a period where Nigeria’s Eurobond yields had been declining.

According to Adu, yields had dropped by about 3 basis points across the curve before the recent tension, while risk levels had fallen to their lowest in five years. This showed that investor confidence had been improving.

Despite the increase this week, some bonds are still yielding below their original issue levels. For example, the November 2027 bond is currently at 5.92 percent, compared to 6.50 percent when it was first issued.

This points to sustained demand for Nigeria’s short-term debt instruments.

The gap between short- and long-term yields highlights how investors are pricing risk across the curve, with longer-dated securities continuing to command higher returns.

Looking ahead, the direction of Nigeria’s Eurobond yields will hinge on developments in the Middle East, with sustained tensions likely to keep yields elevated, while any easing could support a return to the downward trend seen earlier in the month.