Bonds Yields Ease, Investors Boost Holdings as Real Return Climbs
The average yield on Nigerian government bonds declined in the secondary market as investors increased their bets in the local debt capital market.
Inflation decelerated to 15.91% despite the global energy crisis, bolstering investor optimism, while Nigeria’s gross domestic product (GDP) is estimated to rise by 4.1%, according to the International Monetary Fund.
Real return on naira increased to 10.59% due to a decline in the headline inflation rate, while the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) maintained the status quo on the policy rate at 26.50%.
Investors raised bets on local bonds in the secondary market to optimise portfolios due to lower bond supply by the Debt Management Office at the recently concluded July auction.
Due to risk-on sentiment, yields contracted across the curve: short (-12 bps), mid (-2 bps), and long (-1 bps), traders said, reflecting a decision to lock in returns after weaker supply at the July auction.
The most notable declines were recorded across Federal Government Bonds with 2027-2031 maturities, bringing the average FGN bond yield down by 6bps to 17.48%.
Fixed income market analysts said debt capital market investor interest remained concentrated on recently auctioned bonds offering attractive yields.
Trading records indicated that fixed income investors positioned at the mid-segment of the curve – demand was seen in the Jan 2035, Apr 2037, and Jun 2038 bond tenors.
These debt papers were quoted at 18.15%/18.07%, 18.15%/18.05%, and 18.15%/18.10%, respectively, Herwood Capital Limited said in an investors’ note.
Fixed income market analysts said early trades were executed on the Jan 2035 and Jun 2038 bonds at 18.00% and 18.07%, respectively.
As the session progressed, demand filtered into the market, and the Jan 2035, Apr 2037, and Jun 2038 bonds were later seen trading at 17.95%/17.85%, respectively. The short and long ends of the curve remained largely quiet. Money Market Rates Mixed as Banks Put Excess Cash with CBN
