Benchmark Yield on Nigerian Bond Falls to 20%
The benchmark yield on Federal Government of Nigeria (FGN) bonds fell to 20.01% on Monday due to increased demand. The market experienced buying interest in local bonds as investors sought to park funds in risk free investments as a result of the attractive yield.
The market has taken note slowed down in bond supply by the Nigerian Debt Management Office (CBN), having met 70% of 2024 bond sales target in the local market. In the recent time, the local bond market experienced sell pressures which lifted the benchmark yield above 20%.
Though returns in the debt market remain high, investors have been earning negative interest yield on naira assets due to high inflation conditions. The bond market ended July with average mid-yield increased by 79 basis points to 19.63%
At the beginning of the week, the market witnessed demand across tenors amidst macroeconomic concern. Investment firm reported that Yield reductions of 54 bps, 42 bps, and 34 bps were observed in the FEB-34, JUN-53, and JUN-33 bond instruments, respectively.
This led to a 0.04% decrease in the average secondary market yield, bringing it down to 20.01%. Across the benchmark curve, the average yield rose marginally at the short (+1bp) end as players sold off the JAN-2026 (+4bps) bond.
Meanwhile, the average yield declined at the mid (-7bps) and long (-5bps) segments, due to demand for the JUN-2033 (-34bps) and JUN-2053 (-42bps) bonds, respectively.
Last month, the bond market was faced with selloffs due to tight system liquidity and an interest rate hike by the CBN. Before monthly auction in July, the market sentiment remained mixed to bearish in anticipation of higher stop rates.
This sentiment filtered into the auction, as the DMO only allotted ₦225.72 billion despite offering ₦300.00 billion worth of bonds.
The total subscription was ₦279.67 billion. Furthermore, the stop rates for Apr 2029, Feb 2031, and May 2033 papers were issued higher than the previous stop rates at 19.89% (+25bps), 21.00% (+81bps), and 21.98% (+48bps), respectively.
#Benchmark yield on Nigerian Bonds Falls to 20% Oil Dips over Uncertainties in Crude Demand, Supply
