Nigeria's 20-Year Bond Rate Spikes Sharply

Nigeria’s 20-Year Bond Rate Spikes Sharply

Trading activities on Federal Government of Nigeria (FGN) bonds in the secondary market ended on a mixed note on Thursday ahead of the Debt Management Office offering for subscription next week. However, the rate of return on FGN 20-year bonds rose sharply to about 15%.

A slowdown in demand for Nigeria’s 20-year bond pushed the yield higher, thus reducing the immediate effects of higher interest rates on holdings in the segment. The bearish tone on the paper was pushed by rapid sell orders executed by funds and asset managers to balance their portfolios.

Meanwhile, the prices of bonds remained relatively flat for most maturities, according to fixed income analysts’ market briefs. This kept yields at the end of the curve steadied. Overall, the average secondary market yield compressed by 13 basis points to 13.22%.

Across the benchmark curve, Cordros Capital analysts stated that the average yield dipped at the short (-34bps) and long (-7bps) ends due to investors’ interest in the APR-2023 (-133bps) and APR-2037 (-47bps) bonds, respectively.

Conversely, the average yield closed was unchanged at the mid-segment, according to market traders and fixed income analysts.

Traders at Cowry Asset Management hint that the FGN 20-year bond was richer by 305 basis points at 14.87%. Meanwhile, the yields on the 10-year, 15-year, and 30-year bonds stayed steady at 13.37%, 14.58%, and 14.96%, respectively.

Elsewhere, the value of the FGN Eurobond decreased for most of the maturities tracked amid renewed bearish sentiment. Notably, the average secondary market yield increased to 10.77%, Cowry Asset told clients.

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