Bonds Rally after Market Sensitive Inaugural Speech
The average yield on Federal Government of Nigeria (FGN) bonds decline on Tuesday following an increased demand for gilt-edge instruments in the secondary market. The market reacted with increased demand for local bonds after a pro-market speech by President Bola Tinubu.
Key players in the economy reacted to President’s plan to remove subsidy on fuel and adopt a market-clearing exchange rate.
The over-the-counter market for FGN bonds has been on a rally as investors remain expectant to see improved yields on debt instruments in the secondary market. The demand level has always been supported by liquidity position in the financial system.
Nigeria favours local debt capital market borrowings over expensive Eurobond issues amidst rising inflation. Large numbers of Nigerian public debt are owed to local investors, reducing external risks strongly.
Consequent to the bond market rally seen after a market-sensitive inaugural speech by President Bola Tinubu, the average yield contracted by 5 basis points to 13.9%, traders said in their market briefs.
Funds/Assets managers allocated some funds to debt papers despite a rally in the equities space. Market analysts said inflation and higher interest rate have reduced the allure of investing in the debt market, with a negative real return, albeit, lower risk,
Across the benchmark curve, Cordros Capital noted that the average yield contracted at the short (-12bps) and long (-5bps) ends as investors demanded the MAR-2024 (-40bps) and APR-2037 (-18bps) bonds, respectively.
A slew of fixed income traders, and market analysts, however, spotted that the average yield expanded 6 basis points at the mid-segment following the sell-off of the APR-2029 (+11bps) FGN bond.
In the market, 20-year and 30-year FGN bonds were 101 basis points and 70 basis points richer, according to fixed income market analysts at Cowry Asset Management Limited.
These bond papers’ corresponding yields decreased 18 basis points to 15.40% and 11 basis points to 15.55% as demand increased. The 10-year and 15-year yields closed steady at 12.54%, and 14.81%, respectively.
Elsewhere, the value of the FGN Eurobond closed higher for all maturities, spurred by reports of fuel subsidy removal and the unification of exchange rates.
Consequently, the average secondary market yield compressed to 11.05%. Elsewhere, the 10-year US treasury yield inched lower to 3.7.0% as tension over the debt ceiling reduced. Airtel Africa Falls to N4.4trn on Price Correction
