Nigeria’s Bond Yield Slumps to 12.7%

Nigeria’s Bond Yield Slumps to 12.7%

Nigeria’s bonds rate slumps to 12.7% amidst the ongoing rally in the local debt capital market ahead of 2023 borrowing plan. In the latter part of 2022, most of the trading sessions in the secondary market ended on bullish note.

Investors maintained buying tempo despite widening real return on investments on account of dearth alternatives window. Though, there was unusual trend that happened in the investment arena.

Both equities and fixed income markets attracted large investments from value hunters in the economy, though foreign investors were largely out of sight due to heightened uncertainties in the foreign exchange market.

With the inflation pressures, and declining local currency including high interest rate environment, returns on naira assets have become much more unimpressive. Traders however told MarketForces Africa that yield will be re-priced with the new borrowing plan coming up.

Federal government plans to securitise N23 trillion ways and means support it received from the Central Bank of Nigeria in 2023, according to Zainab Ahmed, the finance minister.

Analysts hope that if the approval is granted, loan to bond swap would increase issuance and yield will rise. However, they noted that the market will continue to contend with rising inflation rate and weak naira.

In the first week trading, FGN bonds secondary market opened bullish note as investors continued to take positions in attractive positions across the curve while anticipating the release of the Q1-2023 bond issuance calendar.

Accordingly, the average yield dipped by 36bps to 12.7%, according to Cordros Capital, saying across the benchmark curve, the average yield contracted at the short (-80bps), mid (-34bps), and long (-2bps) segments.

The happened following demand for the APR-2023 (-161bps), NOV-2029 (-44bps) and APR-2049 (-16bps) bonds, respectively. >>>Nigerian Treasury Bills Yield Falls to 4%, Bonds Steady

“In the short term, we expect FGN bond yields to oscillate around current levels, pending the publication of the FGN bond issuance calendar for the first quarter of 2023.

“Notwithstanding, we maintain our view of an uptick in bond yields in the medium term, as the FGN’s borrowing plan for 2023 and expected fiscal deficit point towards an elevated supply”, analysts said.

Traders notes showed that the 10-year, 16.29% FGN MAR 2027 paper, and the 20-year, 16.25% FGN APR 2037 paper, gained N4.41, and N0.34 as demand spike in the bond market.

Consequently, the bonds instruments corresponding yields fell to 12.60% (from 13.93%), and 14.57% (from 14.62%), respectively, Cowry Asset Management notes show.

However, the 30-year, 12.98% FGN MAR 2040 bond lost N0.99; its corresponding yield rose to 14.15% (from 14.00%), while the yield of the 15-year, 12.50% FGN MAR 2035 note remained unchanged at 13.50%.

Elsewhere, the value of FGN eurobonds traded on the international debt capital market increased across all maturities due to renewed buying interest.

Specifically, the 10-year, 6.38% JUL 12, 2023, the 20-year, 7.69% paper FEB 23, 2038, and the 30- year, 7.62% NOV 28, 2047, all gained $0.44, $1.95, and $2.25.

Their corresponding yields fell to 8.23% (from 9.06%), 12.22% (from 12.48%), and 11.87% (from 12.29%), respectively. # Nigeria’s Bond Rate Slumps to 12.7%