Nigeria Bonds Value Decline, Yield Rises to 14.1%

Nigeria Bonds Value Decline, Yield Rises to 14.1%

The average yield on the Federal Government of Nigeria (FGN) bonds instrument settled at 14.1% midweek as a result of sell down by asset; and fund managers in the secondary market.

In the fixed interest market, investors currently earning below the annual inflation rate of 24.08% in the bond market despite a double-digit high interest rate environment.

While investors see the development as a form of financial repression that allows the government to borrow from the organised market at cheaper rates, experts told MarketForces Africa that risk-free investment attracts no premium.

The lack of alternative investment options has helped the market to stay afloat, supported by government regulation that forces pension fund administrators to invest a large chunk of pension assets in local borrowing instruments.

Investors in the local bond market continue to seek yield repricing to reduce exposure to accelerating inflation, but sizeable liquidity in the financial system has continued to push demand higher, helping debt agencies to reduce funding costs on borrowings.

Yesterday, Cowry Asset Managers said in their market update that the Nigeria Interbank Offer rate (NIBOR) fell across the board for all maturities tracked.

Asset managers attributed the development to a surge in liquidity level. Cash-rich local deposit money banks with liquidity requested, accepted lower rates as activities in the Central Bank of Nigeria’s (CBN) standing lending facility (SLF) slowed down.

Notably, the six-month NIBOR rate decreased by 204 basis points, reaching 10.52%, according to Cowry Asset while other money market short-term benchmark rates declined.

Data from FMDQ showed that the open repo rate (OPR) and the overnight lending rate (OVN) closed in a mixed bag. Overnight crashed by 10 basis points to 3.00% while OPR advanced 8 basis points to 2.5%. 

Also, the average secondary market yield on Treasury bills was bullish. Due to buying momentum in the market, the average yield declined 2 basis points to close at 7.27%.  On the other hand, the bond market ended on a bearish note.

The selloffs on government bonds pushed the average yield advanced by 6 basis points to 14.1%. Across the benchmark curve, Cordros Capital told investors via email that the average yield expanded at the short (+24bps) end following the sell-off of the MAR-2025 (+113bps) bond.

Elsewhere, the average yield closed flat at the mid and long segments. Selling pressure was seen across mid- and long-dated securities, particularly in the 23-FEB 2028 bond, which led to an expansion in the yield. Bonds Yield Rises 20bps Amidst Mixed Expectations

Cowry Asset said 10-year and 30-year borrowing costs stayed flat from the last close of 14.26% and 15.40%, while the 20-year paper also held steady at 15.19%. 

Elsewhere, FGN Eurobonds were largely bearish for most maturities tracked, as the average secondary market yield closed higher at 11.02%. Looking ahead, fixed interest securities traders said the current macroeconomic headwinds and stubbornly high inflation rate could prompt investors to bid for higher rates as incentives. #Nigeria Bonds Value Decline, Yield Rises to 14.1%

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