Senegal’s 2028 note trades near 1,200 bps
Ninety One Plc is directing investors’ attention to Africa’s hard-currency sovereign bonds, arguing that parts of the market may be underpricing potential credit-rating upgrades even as risk premiums across the continent have declined.
In its outlook for the year, the UK-based asset manager said hard-currency bonds in select African countries may not fully account for the possibility of credit-rating improvements. The firm described the region as a segment of emerging markets that was previously avoided by some investors because of economic risks, but where fiscal adjustment and reform efforts are creating differentiated opportunities.
Ninety One outlined two other approaches to African fixed income: high-yielding local currency markets where macroeconomic trends are improving and market technicals are supportive, and what it called “idiosyncratic turnaround stories.”
On the local-currency side, the firm pointed to Nigeria, where yields have attracted carry-focused interest. “The Nigerian naira remains an attractive carry market, while on the hard-currency side, Senegal is on a positive trajectory thanks to ongoing economic reforms and resilient regional market access,” wrote Thys Louw, an EM fixed-income portfolio manager who oversees $1.7 billion in assets under management at Ninety One.
The manager also cited fiscal progress among oil exporters including Nigeria and Angola, and identified reform-focused markets such as Egypt, Kenya and Morocco. For Egypt, Ninety One said the pound is viewed as benefiting from an improved fiscal position and extended economic support from the Gulf.
Market indicators also point to easing stress in African sovereign debt. The number of issuers considered distressed has narrowed to three — Senegal, Gabon and Mozambique — after spreads compressed alongside an emerging-market rally. Sovereign spreads across the continent have tightened to their lowest level since 2018, with a JPMorgan Chase & Co. index closing Thursday at 335 basis points. Under JPMorgan’s definition, debt is distressed when spreads trade near or above 1,000 basis points over US Treasuries.
Mozambique’s additional yield over US Treasuries fell below 1,000 basis points this month, making it the first time since 2015 that no African country carried a four-digit yield premium. PineBridge Investments sovereign analyst Joseph Cuthbertson said, “We have observed fundamental improvements across several countries in Sub-Saharan Africa, aided by IMF programmes, as well as some domestically driven reform stories.”
However, bond-specific pressures persist. Senegal’s bond curve has inverted, and its March 2028 note traded at about 1,200 basis points above US Treasuries, even as overall pricing remained below the 1,000 threshold.
