Fixed Income Market Yield to Decline in 2025 – Analysts
Fixed income market yield has been projected to decline in 2025 amidst changing dynamics around inflation and interest rate expectations for the year. Nigeria plans to raise more than N7 trillion from local debt capital market to partially finance the 2025 budget deficit.
Latest market data revealed that the average yield on Nigerian government bonds has continued to hover at 19.78% due to subdued trading activities ahead of the bond auction calendar.
The lower supply has kept trading activities tight, and some investors anticipate yield repricing in the debt market on the back of rising headline inflation in the country. Analysts’ consensus revealed that inflation will recede as Nigeria’s refineries come upstream and the latest subtle price war with Dangote Refineries and NNPC Limited.
The Nigerian government is targeting an inflation rate of 15 percent in 2025, according to details from the budget. President Bola Ahmed Tinubu presented a N49.7 trillion budget proposal for the 2025 fiscal year. The President projects inflation, which has been soaring, to drop from 34.6 percent to 15 percent in the 2025 proposal. In the proposed fiscal plan,
“Given our projection for a reducing inflationary trend in the economy for 2025, we anticipate the monetary authorities to initially implement a hold in the interest rate, followed by rate cuts”, Cedrus Group said in its outlook for the year.
According to analysts, this is expected to have several implications in the fixed income market. Cedrus Group said rate cuts would lead to a general decline in yield across the fixed income market.
“Investors would see a moderate decline in yield as the market adjusts to the reigning interest rate.
“Existing bonds become more attractive, leading to an increased demand and subsequent reduction in yield. New bond issuance would be in line with the market rate, offering a relatively lower yield,” the firm explained.
Hence, analysts expect the fixed income market in 2025 to experience a moderate yield decrease, driven by higher pricing on existing bonds and relatively lower yields on new issuances. Navy Intercepts Boat Laden with 100,000 litres of Stolen Crude Oil in Ond
