Investors Double Down Bets on Nigerian Bonds as Equity Market Bleeds
The benchmark yield on Federal Government of Nigeria (FGN) bonds declined as appetite for naira assets across the belly and long end of the curve increased.
Trading patterns in the local bonds secondary market reflected investors’ persistent interest in duration as the treasury bills auction signalled potential repricing at the November bonds auction.
Last week, the Nigerian bond market closed on a bullish note, buoyed by strong investor appetite across most maturities. Sentiment improved markedly as investors sought refuge in fixed-income instruments amid growing volatility in equities and global markets, Broadstreet analysts said.
The sustained demand drove a modest yield compression, with the average benchmark yield declining by 12 basis points week-on-week to 15.77%, according to Cowry Asset Limited.
With robust liquidity in the financial system, asset managers including local deposit money banks sought to increase bets debt markets with eyes on bonds.
Early buying interest drove yields on Nigerian bonds that will mature in 2027, 2028 and 2029 down to a range of 15.42% – 15.83%, while borrowing papers that will expire in 2032, 2033, and 2034 also recorded modest gains to 15.70%, 15.68%, and 15.4%, respectively, According to AIICO Capital Limited.
However, activity at the long end, including the FGN Bonds that will expire in 2035, 2042 2045, 2050, and 2053 remained relatively quiet. Overall, the average benchmark yield declined by 12bps week on week to close at 15.77%.
The investment firm revealed that demand was concentrated in mid-to-long tenor bonds, signalling a preference for duration exposure and expectations of relative yield stability and potential capital gains in the near term.
Local bond market is expected to sustain its bullish tone in the near term, buoyed by steady demand from pension funds, asset managers, and institutional investors seeking safe and predictable returns.
“Investors are likely to position ahead of the next primary auction, taking advantage of attractive yields along the mid-curve amid expectations of moderated inflation and liquidity support from the Central Bank”, analysts said. US Treasury to Offer $125bn Securities to Refund Privately Held Notes
