The price and yield movement of a Eurobond instrument is largely impacted by the health of the issuing country, for the case of Nigeria the FGN Eurobond instrument is considered a risky instrument as the economy is highly dependent on earnings from Oil which is impacted by the global and not controlled by Nigeria. Therefore, the movement in price and yield of the FGN Eurobond was majorly driven by movement in oil price and most recently the COVID-19 pandemic.
Also, news of the US stimulus package and a coronavirus vaccine boosted investor confidence as yields declined and bond price rose towards the end of the year (Prices move inversely with yields).
The price index movement of the FGN Eurobond represented a â€˜bullish flagâ€™ or what shaped up to be a generally rising slope for 2020, at the peak of the pandemic the price index fell as low as 77.61, however, with the gradual reopening of global economies and a restored hope in economic recoveries across countries, the price index picked up a step or two and at the end of the year the index pirouetted higher than the pre-COVID-19 period, the price index rose YTD by +4.79% as of 30th December 2020 (see chart 5 below).
Chart 1: FGN Eurobond YTD Price Index for 6.75% US$500m Jan 2020
Source: Cbonds, Proshare Research
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