Investors Ramp Up Nigerian Bonds Amidst Policy Shift Expectation
The Nigerian bonds yield retraced in the secondary market on booming investors’ appetite ahead of February auction, inflation figure, and monetary policy committee meeting. Investors’ confidence on naira asset remained strong as reflected in increase demand for the local bonds in the secondary market.
Last week demand for short and mid-term instruments intensified as investors sought to lock in attractive rates amidst broader economic uncertainties, Cowry Asset Limited said. However, the local bonds market witnessed improved trading volumes, which further reinforcing the bullish sentiment ahead of inflation figure.
Bonds trading started off on a cautious note last week, with trading focused on the February 2031 and January 2035 maturities. But as the week progressed, buying interest strengthened, particularly in the newly issued April 2029, alongside February 2031, May 2033, and January 2035 securities, AIICO Capital Limited said in a note.
Demand softened ahead of the Nigerian Treasury bills auction on Wednesday, but trading rebounded as participants shifted attention to the secondary market thereafter. The market witnessed sustained demand for the local bonds in the latter part of the week, underpinned by renewed interest in the JAN-2035 bond, which declined by 92bps during the week.
Notably, yields on the Jun-33 and Feb-34 papers dipped 54bps and 86bps respectively, CardinalStone Limited told investors in a note. Hence, the average yield decreased by 16bps week on week to 20.53%, traders said in their separates reports.
Across the benchmark curve, the average yield decreased at the short (-15bps) and mid (-28bps) segments, as per investors note released by Cordros Capital Limited. The contracted yield was driven by demand for the JAN-2026 (-113bps) and JUN-2033 (-54bps) bonds respectively, while the average yield closed flat at the long end.
Market activity was largely driven by sustained investor confidence in the high-yield environment and expectations of a potential shift in monetary policy.
CPI Rebased Driven Policy Shifts
The market expects inflation figure for January to shrinks significantly due to decision to rebase the consumer price index. The inflation figure which is expected to be released before Debt Management Office monthly bond auction will have significant impacts on bonds pricing.
At the same time, the monetary authority is expected to halt its hawkish pose on the back of lower inflation expectation. Some analysts anticipate that a shift in monetary policy direction could see benchmark interest rate coming down gradually as part of an effort to drive economic growth. #Investors Ramp Up Nigerian Bonds Amidst Policy Shift Expectation Africa’s 1bn Youths are Potential Future Global Workforce – Microsoft
