Nigeria’s Bond Buying Increases as Naira Appreciates
Trading activities in the local debt capital market ended on bullish note midweek as investors – retail and institutional increased bond buying momentum while the Nigerian local currency gained in the forex market.
A key attraction in Nigeria’s economy isn’t policy direction but the market has forecasted stability after the 2023 presidential election jittery eased despite higher levels of macroeconomic uncertainties in the economy.
While Nigeria’s inflation rate continues to rise, the return on fixed-interest assets has been negative but a dearth of alternative investment options keeps the market in shape.
Also, by regulation, pension fund administrators (PFAs) are obliged to spend a large chunk of retirement savings accounts to acquire government bonds irrespective of market conditions.
In the bond market yesterday, the prices of FGN bonds were largely flat for the bulk of the maturities examined. However, the average secondary market yield contracted to 13.13%.
Across the benchmark curve, market analysts Cordros Capital Limited told clients via email that the average yield contracted at the short (down by 10 basis points) end as investors demanded the MAR-2024 (losing 65 basis points) bond.
Yield however expanded at the long (+4bps) end due to the sell-off of the APR-2037 (+14bps) debt instruments in the secondary market. Conversely, the average yield was flat at the mid-segment.
In a brief, fixed income analysts at Cowry Asset Management told clients via email that the 20-year FGN bond was cheaper by 0.78%, while its corresponding yield expanded to 15.52% (from 15.38%).
In addition, fixed interest income asset traders said the 10-year, 15-year, and 30-year FGN debt instruments yields stayed steady at 12.92%, 14.68%, and 15.00%, respectively.
Elsewhere, the value of the FGN Eurobond decreased for all of the maturities amid renewed bearish sentiment. Likewise, the average secondary market yield expanded to 12.33%.
In the FX market, the Naira strengthened against the greenback, exchanging at N461.25 (from N461.50) at the I&E windows. Conversely, the parallel market depreciated by 0.40% to N754 from N750
