Benchmark Yield on Nigerian Bonds Climbs to 19.05%
As the interest rate hike altered investors’ moods on Nigerian government bonds, the benchmark yield accelerated due to sustained selloffs seen across the short, belly, and longer ends of the curve.
In the secondary market for Federal Government of Nigeria (FGN) Bond market, negative trading activity led to a 0.25% increase in the average yield, pushing it up to 19.09%.
The monetary authority hiked interest rate to 27.25% last month, raising market expectations for a better return on investment. Since the onset of the monetary policy committee’s hiking cycle, the fixed income market has been the preferred destination for investors to leverage the attractiveness of yields.
Institutional investors, Pension Fund Administrators (PFAs) and other asset managers remained core players with elevated yield.
Even at that, investor funds are still exposed to inflation negatively, and analysts predict it is unlikely to see the gap close as the Debt Management Office keeps rates subdued to reduce pressure on federal government debt service costs.
Yields expanded at the short (+41 bps), mid (+17 bps), and long (+13 bps) segments, with notable activity around the 28s and 29s. As a result, the average yield rose by 25 bps to settle at 19.09%.
The yield curve was shifted due to profit-taking activities on the APR-2029 (+128bps), JUL-2030 (+41bps), and JUN-2038 (+85bps) bonds, respectively.
With the recent 50 basis points increase in the benchmark interest rate, fixed interest rates are expected to stay elevated, maintaining investor interest.
However, liquidity remains a key driver of yield direction, and analysts anticipate it will continue to shape market activities. #Benchmark Yield on Nigerian Bonds Climbs to 19.05% Liquidity: Banks Drive Yield Surge with T-Bills Selloffs
