Barclays is recommending investors shift away from Nigeria longer-dated dollar bonds, noting that yields in the mid-section of the curve now look more attractive.
Analysts led by Andreas Kolbe remain overweight Nigerian hard-currency bonds, but note the yield curve has lagged the steepening momentum seen in other emerging markets, where short-dated bonds have rallied more than longer maturities.
That leaves room for Nigerian shorter-dated securities to play catch-up, Kolbe says, suggesting clients switch out of the bonds maturing 2049 into 2033 paper.
The Z-spread between the 2033 and 2049 issues — the volatility-adjusted yield premium above Treasuries over the life of the bond — has actually flattened by about 25 basis points year-to-date, Kolbe said. That means it “screens as too flat relative to the front-end,” compared with high-yield emerging-market debt curves.
“We hence think value has shifted away from the long end and into the 8- to 10-year belly of the curve,” Kolbe added.
Given the steepness of Nigeria’s curve, the trade should also benefit from attractive rolldown, he said, referring to the strategy that profits from a rise in bond prices as they approach maturity.
Nigeria’s average yield premium over Treasuries stands currently at 571 basis points, down about 350 basis points since May 2023 when President Bola Tinubu took office and embarked on a series of reforms.
Tinubu was endorsed this week as the ruling party’s candidate for the 2027 presidential election.
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