Nigeria's 10-Year Bond Yield Falls 280bps to 12.24%

Nigeria’s 10-Year Bond Yield Falls 280bps to 12.24%

Ahead of a massive local debt ramp-up by Nigeria’s debt agency, the price of bonds has been on an uptrend, causing a drag on the yield curve. In the bond market, Nigeria’s 10-year bonds rallied, and the yield declined 280 basis points to 12.24% on Wednesday.

Demand for government borrowing instruments by local investors has been upbeat and the buying interest spikes further midweek in the secondary market ahead of inflation data for December 2022.

Nigeria’s capital market has been maintaining a twin rally, both equities and fixed income markets have been on an uptrend with buying interest. Investors are locking money into naira assets despite exposure to higher inflation and falling local currency.

Key market drivers have been pension fund administrators that are taking positions as part of their portfolio strategy as fund managers continue to take positions between dividend-paying stocks and high-yielding fixed income instruments.

In the fixed income market, yields have continued to slow down as expectations for repricing become cold as market participants pump funds into government instruments.

With higher country risk, Nigeria’s Bond yield curve has returned to a flattish level. Some analysts said this could be a signal of positive expectations. However, others think the lack of alternative investment windows on account of shallow local debt market financial products offering gives investors narrow options to bet.

Proceeding in the secondary market show that investors were bullish on FGN bonds, and the price rose as more funds were channelled across tenored. As a result, the average yield contracted by 4 basis points to 12.5%.  >>>Money Market Rates Sink as Liquidity Improves

Looking across the benchmark curve, Cordros Capital told investors that the average yield contracted at the short (-10bp) end due to investors’ demand for the FEB-2028 (-41bps) bond, s relatively shorted dated instrument to keep the accepted risk level low.

Meanwhile, yield closed flat at the mid and long end of the curve, according to traders’ notes. Traders said FGN bonds remained relatively flat for most maturities. In contrast, the average secondary market yield contracted by 4 basis points.

Specifically, the yield on the 10-year note retreated by 280 basis points (2.80%) to 12.24%, Cowry Asset Management told clients in an email. Meanwhile, market analysts and traders saw yields on the 15-year, 20-year, and 30-year bonds steady at 13.50%, 14.77%, and 14.57%, respectively.

In the international debt capital market, FGN Eurobond increased amidst sustained bullish sentiment. Consequently, the average secondary market yield contracted by 12 bps to 10.83%.# Nigeria’s 10-Year Bond Yield Falls 280bps to 12.24%

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