Nigeria's Bond Yield Declines to 14%

Nigeria’s Bond Yield Declines to 14%

The average yield on Federal Government of Nigeria (FGN) bonds slumped to 14% on Monday as a higher inflation rate continues to reduce the real return on investment securities.

Bondholders and asset managers sold off despite the improved liquidity in the financial system, pushing yield upward. Nigeria’s inflation rate printed at 22.22% in April widening the real return gap.

Relatively robust liquidity in the financial system caused the decline in funding rates as both repo and overnight lending rates tracked lower yesterday.

Market data from the FMDQ Exchange platform showed that short-term benchmark rates: the open repo and overnight lending rates moderated 200 basis points to 12.88% and 13.63% respectively.

Last week, MarketForces Africa reported that the Debt Management Office (DMO) sold more than N360 billion and spot rates were still under pressure despite worsening inflation and naira movement.

In the secondary market, the value of FGN bonds was flat for most maturities, despite the average yield on the secondary market contracting by 6 basis points to 14.00%.

Across the benchmark curve, fixed interest securities analysts said the average yield contracted at the short end by 19bps as investors demanded the MAR-2024 (-73bps) bond.

Conversely, the average yield closed flat at the mid and long segments.  Cowry Asset Management reported that the 10-year FGN bond was 55 basis points richer in its market note, yielding 12.45% from 12.65% in the previous week.

The 15-year, 20-year, and 30-year FGN bond yields held steady at 14.81%, 15.58%, and 15.77%, respectively.  Market analysts stated that the value of the FGN Eurobond cleared higher for most of the maturities amid sustained bullish sentiment.

Consequently, the average secondary market yield compressed to 12.52%. #Nigeria’s Bond Yield Declines to 14% Naira Steadies as Banks Issue Update on FX Purchase

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