Nigerian Bond Yield Falls Below 19% as Market Rallies
The benchmark yield on the Federal Government of Nigeria (FGN) bond dipped below 19% in the secondary market due to increased demand by local investors following a better economic performance in the second quarter of the year.
Data showed that Nigeria’s gross domestic profit rose by 3.19% at the same time when the nation experience first disinflation. Economic reform would put Nigeria on a map for growth, analysts said, noting that negative naira fluctuation remains the elephant in the room.
Consumer price index has been projected, by market consensus, to decline further in the remaining part of the year, thus reduced negative real return earned on investment in the fixed income securities market.
Market analysts said the moderation in negative real return to 6.65% in the fixed income market as a results of inflation rate (33.40%) versus benchmark interest rate of (26.75%) has been responsible for the ongoing rally in the secondary market.
Already, the Debt Management Office has started to reduce bond supply at the primary market as the authority has meet more than 70% of 2024 target in the debt market. Surprisingly, the debt office sold more than total offer at the last auction, raising expectation that bond supply might improve again in September auction.
Yesterday, the bond market rallied. Hence, yield contraction was seen at the short (-20 bps), mid (-18 bps), and long (-15 bps) segments of the curve. Fixed interest securities analysts at AIICO Capital Limited said in a note that most of the interest was directed towards the 2031 and May 2033 FGN bonds.
Across the benchmark curve, Cordros Capital Limited told investors that the average yield declined at the short (-12bps), mid (-10bps), and long (-15bps) segments.
Analysts attributed the yield contraction across the tenor to demand for the JAN-2026 (-32bps), JUN-2033 (-25bps), and APR-2037 (-95bps) bonds, respectively. The market ended bullish with an 18-bps decline in the average yield to 18.78%.
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