Nigerian Bonds Face Sell Pressures, Yield Climbs by 12bps
The Nigerian government bonds yield climbed by 12 basis points as investors rotated out from the naira asset in the secondary market ahead of inflation data scheduled for release this week.
Inflation is expected to ease further following the rebasing of the consumer price index. With disinflation, improve macro perception and slowdown in bonds supply, analysts project yield would drop further as investors continue to lock in.
A declining yield could also trigger capital reversal, as lower returns on portfolios often trigger foreign portfolio investors to exit positions and convert naira to dollars for offshore upstreaming.
Ahead of Nigeria’s inflation data release, trading activities were bearish as the stronger-than-expected print of the OMO auction increased sell pressures, according to Cordros Capital Limited.
Analysts noted that the average yield for bonds advanced by 12 bps to 16.5%. Across the benchmark curve, the average yield increased at the short (+24 bps) and mid (+2 bps) segments. The yield surges were driven by demand for the MAR-2027 (+33 bps) and APR-2032 (+46 bps) bonds, respectively, while yield closed flat at the long end.
Over the medium term, analysts at Cordros Capital Limited maintain expectations of moderation in bond yields, influenced by the anticipated dovish monetary policy stance and demand and supply dynamics.
Early sessions saw selling pressure in the short- to mid-tenor segment, with notable yield increases on the FGN 2029, FGN 2032, FGN 2034 and FGN 2034. By midweek, trading turned cautious as attention shifted to the about ₦2.12 trillion OMO and ₦173.25 billion Treasury bill sales, prompting mixed moves at the mid-end.
Fixed income market analysts at AIICO Capital Limited said in a note that investor sentiment improved thereafter, supported by selective buying in papers such as the FGN 2035s, which recorded a yield decline of 29 bps. Towards the end of the week, activity was largely muted, with brief buy-side interest, moderate mid-tenor repricing, and mild short-end sell-offs before yields retraced.
Overall, the market closed slightly bearish, with the average benchmark yield edging up 12 bps, reflecting investor caution amid tight system liquidity and limited primary market triggers.
Fixed income market analysts anticipate that sentiment in the domestic bond market will remain subdued, adding that investors may stay on the sidelines as the DMO continues to fine-tune bond supply in a bid to manage borrowing costs and stabilize yields. Nonetheless, isolated demand at attractive points on the yield curve could spark intermittent rallies. # Nigerian Bonds Face Sell Pressures, Yield Climbs by 12bps# FIRS Begins E-Invoicing, Electronic Fiscal System for Large Taxpayers
