Nigerian Bonds Yields Slide as Investors ‘Get In’
Investors ramped up more bonds in the secondary market as the Central Bank of Nigeria (CBN) monetary policy committee kept the benchmark interest rate at 27.50% at the just-concluded meeting.
Fixed income assets have become attractive, now offering inflation-protected returns. The wave of optimism swept through as investors took time to digest the outcome of the CBN monetary policy committee meeting. Amidst the cautious atmosphere, buying interest was strongest at the mid-segment of the yield curve.
With the sharp decline of the inflation rate, the real return on fixed-interest securities was upturned from negative to position, providing a cover against the income-damaging consumer price index. This has ushered in ‘get me in investment bets’ from high-net-worth individuals and institutional investors.
Investment experts told MarketForces Africa that investment in fixed interest securities can now be optimised to protect wealth against inflation with a 3.02% real return on investment.
The proceedings were bullish as investors increased their Nigerian bondholdings. According to market reports, the majority of buying activity occurred at the long end (-31bps) of the curve, where investors showed interest in the JUN-38 (-90bps), APR-37 (-79 bps), and MAR-36 (-60bps) papers.
The market recorded steady demand for on-the-run papers, particularly the April 2029, February 2031, and January 2035 maturities, analysts said in their separate notes. Demand also spread to nearby mid-tenor papers, including the February 2034, May 2033, and June 2038 maturities, as investors focused on selectively acquiring attractive, high-yielding securities. Overall, the average mid-yield dropped by 19 bps, closing at 18.99%.
This demand pushed yields down by 90 basis points, with the 2038 bond closing on bid at 19.35%. Trading ctivity at the short end of the curve leaned towards the bears, as some players opted to offload positions.
Across the benchmark curve, the average yield decreased at the long (-31 bps) end as investors increased positions. The buying interest was driven by interest in the JAN-2042 (-90 bps) bond, while it closed flat at the short and mid segments. Next week, the Debt Management Office is expected to conduct a primary market auction. Analysts sampled have revealed strong demand expectations as pension fund administrators are projected to increase bond holdings sharply. #Nigerian Bonds Yields Slide as Investors ‘Get In’
