Nigerian dollar bond yields spiked to this highest since 2013 as the slump in oil prices and fear of the spread of Ebola is spreading fear amongst investors. Investors are reacting negatively and have been selling off Nigerian bonds sending yields higher. Here is how Bloomberg and Reuters described the news
Nigeria is likely to be the worst hit by the oil price plunge, with crude prices now around the levels at which the country balances its budget. Its 2023 U.S. dollar-denominated bond fell almost 3 cents in the dollar to trade at a six-month low.
Although the Ebola epidemic remains largely confined to the minnow economies of Guinea, Sierra Leone and Liberia, worries about its spread in west Africa are mounting.
African dollar-denominated bonds from Nigeria to Kenya tumbled, sending yields higher, as an oil-price slump and concerns about the spread of Ebola damp investor demand for assets in frontier markets.
Yields on dollar bonds sold by Nigeria, the continent’s biggest oil producer, jumped the most since they were issued in July 2013 to the highest level since April. Ghanaian, Kenyan and Zambian securities also suffered record losses. Yields on Nigeria’s $500 million of bonds due July 2023 climbed 43 basis points to 5.84 percent by 5:11 p.m. in Lagos, the capital. That’s the biggest one-day increase since the bonds were sold in July 2013, according to data compiled by Bloomberg.
When investors sell bonds in droves the price of bonds drops sending yields high because the price of a bond is inversely proportionate to interest rates.