Investors Increase Bets on FGN Bond as Yield Remains Elevated
Investors, bondholders refused to give up Federal Government of Nigeria (FGN) bond buying in the secondary market after disinflation raised the real return on naira assets.
In the market, trading activities ended on a mixed note, albeit, with bullish sentiment as investors restocked their portfolio ahead of the next auction scheduled for Sept. 23
The buying momentum seen at the over-the-counter market was spurred by investors expectations that the Debt Management Office (DMO) would reduce bond supply at the primary market auction.
From the beginning of the year to date, the debt office has raised some N5 trillion from the debt capital market, and most of the bets were staked by pension fund administrators and local banks.
On Wednesday, traders said in their separate updates that it was a quiet day in the bond market, with some buying interest observed at the mid-segment (-3 bps) and long end (-2 bps) of the curve.
Buying interest in the MAY 33 FGN bond caused its yield to decline by -24 bps, while demand for JUN 53 FGN paper dragged its yield lower by -20 bps. As a result, average yields on FGN bond instruments contracted by a basis point to close at 18.83% in the secondary market.
Today, the local FGN bond market had two distinct periods, AIICO Capital Limited said. Analysts explained that earlier in the day, there was selling interest in specific bonds (2031s and May 2033 papers).
However, towards the end of the market session, there was a resurgence of market bids, especially for the May 2033 paper, as investors looked to take advantage of the high yields. “We expect the buying interest to persist tomorrow,” the investment firm said.
Analysts at Cordros Capital Limited stated that across the benchmark curve, the average yield closed flat at the short and mid segments, but declined at the long (-2 bps) end due to demand for the JUN-2053 (-20 bps) bond. #Investors Increase Bets on FGN Bonds as Yield Remains Elevated CBN Defends Naira with $39m in Forex Market
