Eurobond Market November Review and Outlook

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In November, the announcement of an effective vaccine for COVID-19, the US election and the second wave of coronavirus outbreak were the headline events that drove performance in the Eurobond market as oil prices rallied to $48/b.

Interestingly, Former Vice President Joe Biden defeated President Trump to emerge the President-elect of the US. At the crude oil market, oil prices improved to $48.0/b through November. This was amid an improved demand outlook and OPEC+ consideration for an extension of the current supply cap agreement.

The above notwithstanding, African Eurobonds issues continued to witness increased volatility, following the news about Zambia’s Eurobond default.

Despite headwinds, bullish sentiments persisted for Nigerian Eurobonds as the average yield on sovereign and corporate Eurobonds fell 28bps and 24bps in the last week of November to close at 5.80% and 6.24%, respectively. This was largely supported by the hopes around COVID-19 vaccines which saw the Brent crude price hit its highest level since March 2020.

In our view, the outlook for Nigerian Eurobonds is broadly positive. We expect the oil market’s fortunes to continue to buoy interest in the Eurobonds, as the gradual approval and rollout of the vaccine improve demand for crude oil and OPEC+ members stay inclined to maintain prices at profitable levels.

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Nevertheless, the risk of potential fallout in OPEC+ talks to defer the supply increase still looms large, as a fallout could reverse gains in the oil market and in turn weaken sentiments for Nigerian Eurobonds.

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