Attractive Yields Boost Bonds Buying in Nigerian Market
The Federal Government of Nigeria (FGN) bonds closed on a positive note in the secondary market as investors continue to ramp up naira assets ahead of key economic data.
Demand for local bonds persisted with demand across the belly and long duration which caused average yield to decline by 5 basis points (bps) to 15.57%.
Yields on bonds are declining but still attractive as market anticipate sharp slowdown in risk premium on local papers. In anticipation of rates repricing at the Debt Management Office monthly bonds auction, investor demand for domestic sovereign instruments remains uptrend.
Fixed income securities analysts said market participants pursued compelling yield opportunities in the naira assets ahead of November inflation and monthly supply.
Investment firm CardinalStone Securities Limited told investors in an emailed note that there were yield contractions at the short (-5 bps) and mid (-9 bps) segments of the curve.
Coronation Merchant Bank Research unit anticipates the disinflationary trend to persist, albeit at a slower pace, with headline inflation projected to ease to 16.29% from 18.02% year-on-year in September.
Inflationary pressures are likely to resurface, primarily driven by rising costs within the services, transport, and energy components, Coronation said, which may partly offset the disinflationary impact of improved food supply as the current harvest season tapers off.
“If the Central Bank cuts the benchmark interest rate in November, the Debt Management Office is more likely to reduce the spot rates offering on local bond issuance,” a Broadstreet economist who preferred not to be mentioned due to workplace rules said in a chat with MarketForces Africa.
Across the benchmark curve, the average yield contracted at the short (-2 bps) and mid (-9 bps) segments, investment firm Cordros Capital told investors in a note.
Analysts said the yield contraction recorded in the secondary market was driven by buying interest in the MAR-2027 (-9 bps) and APR-2032 (-38 bps) bonds, respectively, but closed flat at the long end.
#Attractive Yields Boost Bonds Buying in Nigerian Market Naira Climbs to N1441/$, Nigeria Sees Declining Blocked Fund
