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First Bank of Nigeria (FGN)’s Eurobond rose to a historic high of $100.75 this week, thus trading at a record premium, a development Renaissance Capital attributed to the improvement in perception of international risk. A Eurobond is a debt contract which records the borrower’s obligation to pay interest at a given rate and the principal amount of the bond on specified dates. The issue has a specific structure and is defined in the European Union Prospectus Directive (89/298) as transferable securities.It will be recalled that the price of the FBN Eurobond last exceeded the $100 threshold in July 2007, but collapsed to a low of $48 on March 5, 2009. The rate represents an increase of about 109 percent increase. “For example, most sub-Saharan Africa Eurobonds significantly rallied last year, starting from first quarter of 2009.

According to Renaissance Capital, “this lagged effect could reflect the weak liquidity and tradability of FBN given its size”. Wale Abe, chief executive officer of the Financial Market Dealers Association (FMDA), said the strength of a currency sometimes determines investors’ interest on the kind of bond to invest in. He is sure that the rise of the FBN Eurobond may not be unconnected with the confidence the Euro is enjoying.It further said the risk profile associated with subordinated nature of the bond may have amplified the spike in yields in the first quarter of 2009 and relatively slowed Eurobonds in its rally afterwards. Renaissance Capital is of the view that the Eurobond was the most attractive instruments in the sub-Saharan Africa debt space in early 2009, more so with the FBN’s top franchise in the Nigerian banking space.

It added that the bond’s attractiveness was based on the demand-supply gap for frontier market bonds which will ultimately and increasingly impact the yields on FBN as the global flight to quality gradually eroded. Renaissance Capital plans to start a Eurobond road show on March 15, the latest Russian borrower looking to benefit from favourable market conditions.“The road show will start next week, likely on Monday,” a banking source said yesterday. Renaissance Capital Bank, a retail lending arm of Renaissance Group which also includes Russia’s major investment bank, picked it together with Citibank to arrange the deal.Russian borrowers, including state-controlled VTB (VTBR.MM), Russia’s number two lender, have raised $2.6 billion in recent weeks in the Eurobond market.Analysts said yields could fall further thanks to strong commodity prices and rising risk appetite among investors.More borrowers including Russian Railways and state-run Russian Agriculture Bank were expected to tap the Eurobond market in coming weeks