Borrowing Costs Spike as Investors Dump Nigeria Bonds
The Nigerian bonds benchmark yield hit about 15.8% as local investors offloaded their portfolio in reaction to accelerating consumer inflation in the country.
Data from the statistics office showed the headline inflation rate rose to 27.33% amidst doubt about whether the monetary policy committee of the central bank will meet in November 2023.
The committee had postponed the meeting indefinitely following the removal of its erstwhile governor, Godwin Emefiele – charged with various infractions and abuse of office.
In its monthly bond auction, Nigeria offered higher spot rates for bond sales in the primary market, according to auction results conducted by the Debt Management Office (DMO).
Recent inflation readings spurred market reaction. Local investors weighed the impacts of the headline inflation rate rising to 27.33% for October reading to gauge the impacts on their portfolio returns.
Fixed income securities traders at Broadstreet explained to MarketForces Africa that selloff recorded is reactions of pension fund managers, and other authorised dealers’ need to fine-tune portfolio strategies amidst the widening gap in real return on the naira asset
Traders at CardinalStone said bearish sentiments lingered in the secondary market as bond sell-offs were skewed towards the opposite ends of the curve: short-end (+10bps) and long-end (+8bps).
The average yield increased by 5 basis points (bps) to close at 15.79%. This increase was driven by yield expansions of 70bps and 41bps observed in the MAR-50 and MAR-27 FGN bonds.
Consequently, the average bond yields expanded by 5bps to 15.79% However, the average secondary market yield on Nigerian Treasury Bills was bullish as it moved 1bp to close at 13.34%.
In Nigeria’s sovereign Eurobonds market, there was a positive level of activity. Buy sentiment was evident across the short, mid, and long ends of the yield curve, leading to a decrease in the average yield by 41bps to 11.13%.
Nigeria offered higher spot rates on the local government monthly bond sales in the primary market, according to auction results conducted by the Debt Management Office (DMO).
Spot rates rose by an average of about 1.36ppt across the APR-2029, JUN-2033, JUN-2038 and JUN-2053 papers to 16.0%, 17.0%, 17.5% and 18.0%, respectively, according to CardinalStone. Naira Devaluation Deepens Economic Crisis in Nigeria
Traders noted that the Federal Government of Nigeria bonds auction was well subscribed at 1.20x above the offer amount of N360.0 billion.