Bond Market Rallies Amidst Surprise Interest Rate Hike
Trading activities in the Nigerian government bond secondary market ended on a bullish note amidst a surprising hike in the benchmark interest rate by the Central Bank’s (CBN) monetary policy committee as part of efforts to combat inflation.
Nigeria’s inflation rate eased for the second month in August, and the deceleration has effectively reduced the negative interest yield on fixed income.
On bonds, yield has remained subdued while investors continue to bet large on Treasury bills because of elevated yield. Due to the bullish activities in the secondary market on Tuesday, the benchmark yield Nigerian government bonds crashed to 18.68%
According to fixed income market analysts, buying activities concentrated at the short end (-4 bps) and mid-segment (-4 bps) of the curve. Bondholders raised bet on MAR 27 FGN bonds, which caused the yield on the borrowing instrument to drop by -40 bps
The market also witnessed investors demand for MAY 33 FGN bond, dragging its yield lower by -29 bps in the secondary market. Analysts at Cordros Capital Limited said across the benchmark curve, the average yield contracted at the short (-8 bps) end.
Fixed income market analysts said the yield contraction was driven by buying interests on the MAR-2027 bond but was unchanged at the mid and long segments. As a result, average yields contracted by 2 bps to settle at 18.68%.
The Monetary Policy Committee (MPC) meeting in September 2024 saw the Central Bank hike the benchmark lending rate by another 50 bps to 27.25%. The committee deemed inflation still elevated despite the recent deceleration.
Other notable actions included increasing the Cash Reserve Ratio (CRR) for commercial banks to 50% from 45%) and raising the CRR for other financial institutions to 16% from 14%. #Bond Market Rallies Amidst Surprise Interest Rate Hike Naira Rises against US Dollar Ahead of Sept. FX Auction

