Investors Step up Bonds Buying on Inflation Protected Return
Improved confidence and positive real return on investment drove buying momentum in the bond secondary market on Wednesday. Despite huge Treasury bill subscriptions of more than N2.4 trillion, investors also increased their respective positions in the secondary market for Nigerian bonds.
The rebased exercise has upturned negative interest yield on fixed income assets in the Nigerian debt market. Based on 24,48% inflation figure and 27.50% benchmark interest rate, asset managers, pension fund administrators, and local banks that invested in bonds are enjoying a positive return of 3.20%.
Traders said fixed interest securities investors ramped up local bonds as interest rates exceeded inflation positions for the first time in a long time. Demand was observed for on-the-run papers, specifically the April 2029, February 2031, and January 2035 maturities.
Interest also extended to surrounding mid-tenor papers, such as the May 2033, as investors selectively targeted attractive, high-yielding securities following the release of revised/rebased consumer price index figures.
Overall, the average mid-yield declined by 11 bps, settling at 19.92% following bullish activities at the mid-segment (-30 bps) of the curve. Analysts spotted investors’ appetite heightened on the FEB-34 (-87 bps) and FEB-31 (-56 bps) papers.
Analysts anticipate the bullish sentiment to continue as the lower stop rates from the NTB auction are likely to drive increased demand for bond securities ahead of next Monday’s FGN bond auction.
With headline inflation moderating by 1,000 basis points to 24.48% and a sustained bullish trend in the fixed-income market, there is a strong case for a rate cut or ease on other policy tools.
Given these dynamics, a reduction in the Monetary Policy Rate within the 100–200 basis points range appears increasingly likely, Erad Partners limited said in an update. #Investors Step up Bonds Buying on Inflation Protected Return Naira Rises to N1,510 after $181mn FX Sales to Banks
