FGN Bonds Yield Clears at 18.92% Ahead of May Auction
Benchmark yield on Federal Government of Nigeria (FGN) bonds cleared lower due to buying momentum in the secondary market. Negative interest yield has persisted in the fixed income market, though yield remains elevated at the treasury bills space.
Investors have been showing interest in short dated borrowing instruments following Central Bank of Nigeria (CBN) higher interest rate offer on bills to attract foreign investors. This cause inverted yield in the debt market.
According to fixed interest securities market reports, buying interests were observed at the mid-end (-5bps) of the curve in the secondary market on Thursday. Traders noted that market participants are awaiting debt office auction for May, 2024 with expectation for spot rates adjustments on the back of changing market dynamics.
Investment in government instrument is exposed to inflation uptrend. Inflation rate printed at 33.20% in March while estimates show there would be further uptick in April. The gap between inflation (33.20%) and benchmark interest rate (24.75%) widened to 8.45% in March.
Given the pattern of trading activities with mild buying interest in the APR-32, FEB-31, and JUN-33 maturities, the average yield on FGN bonds declined 2basis points, settling at 18.92%.
Traders said the average yield expanded slightly at the short (+1bp) end driven by sell pressures on the MAR-2025 (+3bps) bond but contracted at the mid (-9bps) segment as investors demanded the APR-2032 (+14bps) bond. Meanwhile, the average yield stayed flat at the long end. Investors See N304bn Gain as Nigerian Stocks Rally
