Benchmark Yield Shrinks as Bonds Market Rallies

The average yield on Federal Government of Nigeria (FGN) bonds shrank in the secondary market as asset, fund managers ramped up the borrowing instruments.

Fixed interest income investors, including large scale buyers like pension fund managers, have seen negative interest yield on portfolio investments over the years due to inflation pressures. 

Investment in FGN bonds accounts for about 70% of Nigerian Pension assets, data from the commission indicates. The rush for government is mainly due to low risk and by regulation, pension managers are restricted from taking high risk with retirement funds.

Some traders attribute the buying momentum to an expectation that the market would seek fresh yield repricing as the debt management office planned to release bond auction details for 2024.

Weighing the temperature in the financial market, investors parked more funds into borrowing instruments, causing the yield curve to drop.

Particularly, investment banking firm Cowry Asset Limited reported that there was strong interest in short and mid maturities leading to a 16bps decrease in the average secondary market yield, settling at 13.36%. 

In its market update, Cordros Capital Limited explained that across the benchmark curve, the average yield declined at the short (-24bps), mid (-33bps), and long (-4bps) segments.

Market analysts at the firm said this happened following buying interest in the MAR-2024 (-72bps), APR-2032 (-42bps) and JUL-2053 (-48bps) bonds, respectively. Naira Rises by 19% as Forex Market Pressures Ease

In Nigeria’s sovereign Eurobonds market, a positive sentiment prevailed across all ends of the yield curve, causing a 15bps decrease in the average yield to 9.98%. # Benchmark Yield Shrinks as Bonds Market Rallies