Investors Take Profit on Bonds as Real Interest Rate Hits 7.38%
Investors with interest in Federal Government of Nigeria (FGN) bonds trimmed their portfolio holdings in the secondary market on Tuesday following a sharp decline in the headline inflation rate for August.
Though real return on investment improved along with disinflation and the high interest rate environment, investors are jittery with analysts altering positions on the monetary policy rate outlook.
The consumer price index data released showed inflation fell from 21.88% to 20.12%, widening the real interest rate to 7.38%, making the fixed coupon payments on the local bonds more valuable in real terms.
In a phone chat, some Broadstreet analysts explained that a widening real interest rate means the actual return on an investment, after accounting for inflation, is increasing.
The bearish tone suggests investors are reassessing their position and expectation ahead of fresh bond supply in September—and the market has started to price the possibility of monetary policy easing.
On Tuesday, the FGN bonds market traded quietly with a sustained bullish tone. Mild activity occurred across the curve, with modest demand for bonds with 2029, 2031, and 2033 maturities.
FGN bonds with May 2033 expiration was quoted at 16.50/16.20%, though wide bid-ask spreads kept volumes moderate, AIICO Capital Limited said.
The market participants in the second market re-evaluated the impact of macroeconomic data, particularly the August 2025 consumer price index (CPI) figures, according to Cowry Asset Limited.
Investors took profit across mid and long duration, leading to a 17-basis-point rise in the average yield to 16.65% from the prior session.
Conversely, the Nigerian Eurobond market concluded on a bullish note, with the average yield decreasing by 16 basis points to 7.76%, reflecting robust and positive investor confidence amid evolving market conditions. #Investors Take Profit on Bonds as Real Interest Rate Hits 7.38% Naira Appreciates to N1484, Sees Stronger Intraday FX Quote
