Bond Yield Mixed as Market Weighs Inflation Concern
Amidst concerns about continuous inflation rate jumps, the Nigerian local bond market traded on mixed sentiments. Yesterday, investment analysts and fixed income traders saw demand at the head of the curve and offer at the tail of the curve.
The market recorded buying interest, particularly in the 26 APR 2029 debt, which led to a contraction in the average secondary market yield to 12.66% from 12.70%. In its market update, Cowry Asset Management said the 30-year borrowing cost increased, yielding approximately 14.82%, up by 19 basis points from 14.63% recorded previously.
Likewise, the investment firm said the 10-year note yielded around 12.90%, which was 9 basis points below 12.99% previously reported. Traders said conversely, the 20-year bonds remained stable at 14.60%, respectively.
Elsewhere, FGN Eurobonds appreciated across all tracked maturities, reflecting renewed bullish sentiment, as the average secondary market yield decreased by 15 basis points to 10.00%.
Cordros Capital Limited said in its market update to investors that across the benchmark curve, the average yield dipped at the short (-1bp), mid (-6bps), and long (-1bp) segments. The decline was attributed to investors demand for the MAR-2025 (-2bps), APR-2029 (-15bps), and MAR-2050 (-7bps) bonds, respectively.
Futureview wrote to investors that the Development Bank of Nigeria (DBN) plans to fund micro, small, and medium scale enterprises (MSMEs) with N23 billion using 5-Year debt capital raised priced at 14.40%.
The investment firm said the development bank plan aims to alleviate financing constraints, which pushed DBN to tap into the domestic market despite high-interest rate environment.
DLM Advisory and Standard Chartered Bank Lead Issuing Partners, Joined by Access Bank, Zenith Bank, FCMB, and Others. DBN’s capital raise is part of its N100 billion medium-term notes (MTN) programme, which focuses on funding MSMEs.
“The primary objective of DBN is to alleviate the financing challenges faced by MSMEs in Nigeria by providing financial support, partial credit guarantees, and technical assistance to eligible financial intermediaries in a market-conforming and sustainable manner”, Futureview explained.
Analysts said previously, DBN sourced capital from international development partners, but now it has decided to explore the domestic market, even amid the high-interest rate environment. DLM Advisory will take the lead as the Issuing House, with support from Standard Chartered Bank, Access Bank, Zenith Bank, FCMB, and other bank lenders.
“The raised funds will be disbursed to MSMEs as loans to help them expand their operations and must be repaid in accordance with approved term sheets. Unlike typical funding for MSMEs, where investors might receive funding in exchange for equity without repayment obligations, this issuance involves loans that require repayment.
The current fragile economy may mildly affect the performance of MSMEs during this period, potentially impacting the repayment frequency. Despite the challenging economic climate, analysts anticipate significant subscriptions to the issuance, leveraging the substantial domestic liquidity.
Additionally, Global Credit Rating Agency, a subsidiary of Moody’s, has given the bond issuance a AAA (NG) rating, reflecting its strong credit quality and reliability”, Futureview said in its market update. #Bond Yield Mixed as Market Weighs Inflation Concern
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