Bond Yield Spikes to 15% as Risk Sentiment Shifts
Benchmark yield on Nigerian bonds spiked to 15.33% due to a shift in risk sentiment driven by macroeconomic uncertainties. Fixed interest securities investors have seen their returns eclipsed by Nigeria’s running inflation rate.
Untamed pressure in the local economy has shifted risk sentiment as naira assets continue to underperform asset managers’ portfolios.
The inflation rate is expected to rise further in the latter part of the year while the monetary authority halts its committee meeting to digest Nigeria’s weak macro condition in policy formulation.
Also, the local currency has suffered from sustained dominance of the US dollar in the forex market, reducing the total value of asset managers investment portfolios in dollar terms.
In the secondary fixed income market, traders said they witnessed selloffs on the short end of the curve. Then, the yield on the MAR-2024 paper witnessed a 2.36ppts increase to 9.22%.
According to CardinalStone, this led to about 49 basis points expansion on the short end of the yield curve. The investment firm said the mid-tenured papers also witnessed a 6bps yield curve expansion, while the overall yield curve expanded by 21bps.
In the money market, funding rates advanced further on Tuesday due to the liquidity squeeze in the financial system which started last week – upturning single-digit low short-term interest rate benchmark.
As a result of pressures on the financial system, money market rates, such as the open repo rate and the overnight lending rate also increased to 15.58% and 16.46%
In Nigeria’s sovereign Eurobonds market, the activity level was bullish leading to the average secondary market yield contracting by 39bps to close at 11.40%., traders said in a note. Arrest Warrant::Court Gives Emefiele Jan. 25 to Appear over $53m Debt
