Nigeria’s US Dollar Bonds Face Sell-Off as 10-Year Yield Climbs to 7.99%

Foreign portfolio investors and asset managers sold Nigerian US dollar-denominated bonds in international markets ahead of the Federal Reserve’s interest rate decision, as investor sentiment weakened across African Eurobonds. 

The broader African Eurobonds market remained bearish as investors adjusted their portfolios ahead of this week’s Federal Open Market Committee (FOMC) meeting.

Although the Federal Reserve is widely expected to maintain interest rates in October, market participants and economists increasingly anticipate a possible rate hike in December 2026, citing persistent core inflation and low unemployment.

Nigeria was not alone in experiencing selling pressure, as investors also offloaded bonds issued by Ghana, Uganda, Egypt and other oil-linked economies, pushing yields higher. Meanwhile, investors returned to US Treasury securities.

In its market update, Cowry Asset Management Limited said the average yield on Nigeria’s US dollar bonds rose by three basis points (bps) to 7.44%, reflecting cautious sentiment among offshore investors.

Yields increased across most maturities, with the three-year FGN Eurobond yield rising by six basis points to 6.44%, while the five-year yield climbed by seven basis points to 7.18%. The seven-year yield increased by two basis points to 7.70%, and the 10-year yield advanced by six basis points to 7.99%.

However, sentiment was more positive at the longer end of the yield curve. According to AIICO Capital Limited, the yield on Nigeria’s 20-year Eurobond fell by one basis point to 8.57%.

Meanwhile, US Treasury yields edged lower and remained near multi-week lows as bond markets increasingly priced in the possibility of a Federal Reserve rate pause at this week’s FOMC meeting.

After climbing to a 52-week high of 5.31% in October amid persistent energy-driven inflation, the benchmark 10-year US Treasury yield has since consolidated around the key 5.00% threshold.

US Treasury yields were largely unchanged on Monday as investors awaited the Federal Reserve’s interest rate decision and a series of economic data releases scheduled for the week.

The benchmark 10-year Treasury yield was little changed at 4.986%, while the 30-year Treasury bond yield declined by nearly two basis points to 5.299%.

In contrast, the yield on the two-year Treasury note rose by three basis points to 4.716%.

One basis point is equivalent to 0.01 percentage points. Bond yields and prices move in opposite directions, meaning rising yields generally indicate falling bond prices and vice versa.