Investors Trim Interest in FGN Bonds, Yields Increase
Fixed interest securities investors trimmed interest in Nigerian government bonds in their portfolios to align with their investment appetite amidst fast changing market dynamics and a widening real return on naira assets.
The sell pressure experienced on the Federal Government of Nigeria (FGN) borrowing instrument dragged benchmark yields downward amidst uncertainties.
Nigeria is on the verge of celebrating one year when the ongoing reforms begun under the President Bola Tinubu. Things have gone awry for citizen hoping to see the proverbial light at the end of the tunnel.
Inflation has damaged the naira asset. The local currency has lost significant value while the apex bank has launched attack against the nation’s hot red inflation with 7.50% increase in benchmark interest rate in less than 5-month to 26.25%.
The Debt Management Office is close to meeting the target for bond sales in the primary market this year, though rates remained depressed when compared with changing market dynamics.
Fixed interest securities analysts said they expect the bond market to respond to the rate hike by the Monetary Policy Committee, which is in line with investors’ expectations.
“The fixed income market is adjusting to the increase in policy rate, which reached unprecedented heights due to persistent inflationary pressures. The high policy rate is pressuring up yields across the fixed-income market as investors seek higher yields on their investments”.
Sentiment in the bond market was negative as average bond yields edged higher by 2 basis points to 18.69%. Activities were primarily seen at the short (+1bp) and mid (+6bps) segments of the curve, especially on the JUN-2033 (+18bps) and FEB-2034 (+30bps) papers. #Investors Trim Interest in FGN Bonds, Yields Increase Moody’s Downgrades Uganda’s Ratings, Changes Outlook to Stable
