Investors Ramp up Nigerian Bonds, Yield Sinks to 18.67%
The benchmark yield on Federal Government of Nigeria (FGN) bonds slide by 2 basis points to about 18.7% in the secondary market. The interest yield on local debt notes widened following inflation surge in April amidst widening real return on investment.
Trading activities on the local debt note has continued to boom however amidst changing market dynamics. Inflation printed higher at 33.69% in April while the apex bank raised benchmark interest rate to 26.25% to combat rising consumer price index.
The local bonds demand has been largely pushed by pension fund administrators who are required by law to invest in government borrowing interest. Investment experts admonish risk averse investors to put their money in government instrument amidst growing concerns in the economy.
MarketForces Africa reproetd that tield in the fixed income market inverted as the Central Bank of Nigeria (CBN) continue to offer higher spot rates on short dated bills. This comes in stark contrast with Debt Management Office subdued rates on government bonds.
Last week, investors parked funds into JAN-42 FGN Bonds and JUL-45 bond instruments, traders said in their market update. This movement caused the average secondary market yield to decline slightly from the previous day’s close of 18.67%.
A total of 82,778 units of bonds valued at N80.570 million were traded this week in 18 deals compared with a total of 9,282 units valued at N8.945 million transacted last week in 24 deals, Cedrus group said in a note.
In its note, Cordros Capital Limited told investors that the average yield advanced at the short end (+4bps) as investors sold off the MAR-2025 bond (+12bps) but closed flat at the mid segment. Meanwhile, the average yield contracted at the long end (-9bps) following demand for the JAN-2042 bond (-59bps).
“We envisage yields in the FGN bonds secondary market is poised to increase in the near term following the 150bps hike in the monetary policy rate to 26.25% by the monetary authorities in its effort to rein in inflationary pressures”, the investment firm told investors. Fitch Upgrades InfraCredit’s Outlook to Positive
