Benchmark Yield on Nigeria Bonds Dips to 13.8%
Ahead of the implementation of the Federal Government of Nigeria’s (FGN) borrowing plan for 2024 via primary market auction, the benchmark yield on bonds dipped to 13.81%.
The average return on investment has been eclipsed by the rising headline inflation rate in the country. Pension asset managers maintained a strong interest in local bonds – perhaps to satisfy regulations which frown on taking excessive risk with pensioners’ money.
This has helped in keeping the local bond market temperature intact. Market analysts hope to see yield repricing but the debt management office has also posited to reduce borrowing costs.
High liquidity levels in the financial market made it possible for debt agencies to reprice spot rates on bonds issued at various primary market auctions conducted in 2023. British Private Sector Economy Expands in December –PMI
In the secondary market for FGN Bonds, trading activity was relatively positive. Consequently, strong interest across the mid and long-end maturities led to a mild 2bps reduction of the average yield to 13.81%.
Across the benchmark curve, the average yield closed flat at the short end but declined at the mid (-10bps) and long (-1bp) segments.
The decline resulted as fixed interest income investors demanded the APR-2032 and JAN-2053 bonds, respectively. Both long-tenured borrowing instruments saw associated yield declining by 15bps and 7bps, traders said in separate market notes.
In Nigeria’s sovereign Eurobonds market, the prevailing sentiment was bearish, across the short, mid and long ends of the yield curve, causing an 8bps increase in the average yield to 10.14%.
