Nigerian Bonds Yield Climbs to 20.4% Ahead of Q1 Auction
The average benchmark yield on Nigerian government bonds increased further as riskoff sentiment nudged yield above 20.4% in the secondary market ahead of the first auction to be conducted by the Debt Management Office (DMO) next week.
Uncertainties in the fixed income market have increased after the headline inflation rate increased to 34.80% while the monetary authority put up series adjustments that put the benchmark interest rate at 27.50% in 2024.
The current market equation revealed that the real return rate printed higher immediately after Nigeria’s inflation rate surged by 20 basis points in December. Inflation (34.80%) is currently above the monetary policy rate (27.50) by 7.3%, exposing investment portfolios to price instability in the local economy.
On Tuesday, bearish sentiments persisted as inflation-propelled sell-offs spooked investors’ sentiment. The bearish play is supported by market participants’ expectation of higher yields at the next primary market auction.
In their notes, fixed income market analysts said they observed sell pressures at the short (+51 bps), mid (+26 bps), and long end (+16 bps) of the curve. Specifically, investors sell down MAR-26 (+262bps), APR-32 (+80bps), and MAR-35 (+139bps) bond papers.
The local bond market maintained its bearish trend, with persistent selling interest in the February 2031 paper, with offers around 22.30% to 22.50%. Investors reduced interest in the local bonds despite the inflow of bond coupon payments worth N91 billion. Portfolio investors shed their holdings across the yield curve.
Feb-31 (+15bps) and May-33 (+13bps) maturities bore the brunt of the impact at the near and mid ends of the yield curve, respectively; at the far end of the curve, the Jun-53 maturity closed at an offer of 17.60%, reflecting the widespread selling pressure.
Across the benchmark curve, the average yield advanced at the short (+33 bps), mid (+30 bps), and long (+15 bps) segments. Bond yield expansion was attributed to selloffs of the FEB-2028 (+84bps), APR-2032 (+81bps), and MAR-2035 (+139bps) bonds, respectively. NCC Hosts Stakeholders’ Forum on A2P Licensing Framework
