Oil Prices Rise Amid Geopolitical Tensions, Fading Hopes For Rate Cut By Federal Reserves

Taiwo Adekeye, FMVA

February 14, 2024

On Tuesday, oil prices experienced a surge amid ongoing geopolitical tensions in the Middle East and eastern Europe. However, gains were limited as investors hope was dampened for U.S. Federal Reserve interest rate cuts. Brent futures was up by 77 cents closing at $82.77 a barrel at while U.S. West Texas Intermediate (WTI) crude surged by 95 hitting at $77.87 a barrel.

South Africa:  The Rand declines amid U.S. inflation and mining figures

The South African Rand weakened on Tuesday after local mining production figures disappointed, and as U.S. inflation data pushed the dollar to a three-month high. U.S. inflation rose beyond expectation in January, signaling that the Federal Reserve will maintain interest rates in March and causing the dollar to jump. South Africa’s total mining output was up by 0.6% year on year in December while total output rose by a revised 6.9% in November. The Rand traded at 19.1000 against the U.S. dollar, about 1% weaker than its previous close while the benchmark 2030 government bond was weaker, with the yield up 5.5 basis points to 10.100%.

Nigeria: FG, in collaboration with the World Bank, aims to secure $3 billion for Nigeria’s broadband infrastructure.

The Federal Government of Nigeria and the World Bank are teaming up to raise $3 billion to fund additional 120,000km fibre optic cables to boost and improve broadband infrastructure and connectivity in Nigeria. The west African nation has laid 3,035km fiber optic cables, but 120,000km fiber optic cables would be required for Nigerians to have quality and efficient access to the Internet and other digital services irrespective of their locations. Additionally, the first phase of the project would involve laying 95,000km fiber optic cables across the country to improve access and digital services content

Kenya: Kenya set to issue $1.5 billion in Eurobonds, subscriptions surpassing $5 billion.

Kenya will issue $1.5 billion worth of seven-year bonds at a rate of 10.375%, making it the first highest coupon payment made by an African issuer this year. The fund is aimed at facilitating the redemption of $2 billion worth of securities that will be maturing in June and the issuance of these new bonds will extend the average maturity period of Kenya’s existing debt portfolio.  It is worthy to note that the East African nation has faced financial duress with approximately $5.2 billion in foreign debt obligations, consisting both principal and interest payments due this year, with an additional $2.7 billion maturing in the upcoming fiscal year.

India: Traders indicate that India’s swap rates suggest a delayed commencement of rate cuts.

Indian debt market participants have pushed their expectations for the start of rate cuts by at least two months after the hawkish tone of the latest monetary policy statement, as reflected in the overnight index swap (OIS) market. Last week, the Reserve Bank of India (RBI) kept its policy rate and stance unchanged for a sixth meeting and reiterated its commitment to meet the 4% inflation target. The one-year swap rose to 6.71% and the five-year gained to 6.33% on Tuesday, both up by around 12 basis points (bps) from before the RBI policy last week.