Nigeria Bonds Prices Slump Over Selloffs
Amidst sustained negative interest yield on naira assets in the fixed income securities market, some local investors continued to offload FGN bonds portfolios in the secondary market on Tuesday.
The equities market then received the fund, which pushed year to date return to about 28%. Across the market, equities return is already ahead of an annual inflation rate of 24.08% in contrast to real return on government instruments.
Again, bearish sentiments remain prevalent in the bond market, with investors’ sell-offs skewed towards the mid (+2bps) and long (+18bps) segments of the curve, CardinalStone told investors via email late night on Tuesday. Some analysts and traders said the selloffs followed weak demand for FGN bonds at the just concluded monthly auction conducted by the debt agency.
Pension Fund Administrators, local deposit money banks and other authorised dealers continue to show hunger for yield repricing, but spot rates movement has not only been unstable but also unimpressive across primary market auctions conducted by the monetary authority and debt management office.
In an update, Cordros Capital said across the benchmark curve, the average yield expanded at the short (+1bp), mid (+5bps), and long (+18bps) segments as market players sold off the MAR-2024 (+8bps), JUN-2033 (+31bps), and MAR-2036 (+74bps) bonds, respectively.
Notably, the 10-year borrowing cost yielded around 14.22%, translating to a 4 basis points increase from the previous close. Also, 20-year and 30-year FGN bonds held steady at 15.19% and 15.30%, respectively. At the close of business yesterday, the average bond yields increased by 9bps to print at 14.03%.
In the money market, liquidity level declined strongly following auction debits, thus pushing short-term benchmark rates higher, causing funding pressures for Nigerian deposit money banks striving to meet their daily liquidity requirements. Consequently, the overnight lending and repo rates advanced by 1.30ppts and 1.45ppts to close at 23.80% and 24.75% apiece.
The Nigerian Treasury bills secondary market traded with bullish sentiments, as the average yield contracted by 11 basis points to 8.3%.
Across the curve, Cordros Capital told investors that the average yield declined at the short (-73bps) end as participants demanded the 65-day to maturity (-293bps) bill but expanded at the long (+6bps) end due to the selloff of the 338-day to maturity (+79bps) bill.
Conversely, the average yield was flat at the mid-segment. Elsewhere, the average yield was unchanged at 11.2% in the OMO bills segment. #Naira Gains 10% in Parallel Market, I&E Rate Settles at N739.52