Nigeria’s Bonds Benchmark Yield Rises to 13.1%

Nigeria’s Bonds Benchmark Yield Rises to 13.1%

The average benchmark yield on Nigerian government bonds rose Thursday as a result of selloffs that pushed prices downward. This is coming amidst higher rate demand on government new issuance by market participants as inflation continues to rise.

In June, Nigeria’s headline inflation accelerated to 22.79%, spooked by food inflation. The figure has not captured the increase in fuel price driven by subsidy removal, according to analysts. As a result, Broadstreet analysts have formed a consensus that the consumer price index would worsen in the second half of the year.

In the secondary market yesterday, fixed income traders said proceedings were bearish as the average yield increased by 18 basis points to 13.1%. This happened despite a higher liquidity level in the financial system.

Across the benchmark curve, Cordros Capital stated that the average yield expanded at the short (+59bps) and long (+4bps) ends, as market participants sold off the MAR-2024 (+294bps) and JUN-2053 (+44bps) bonds, respectively.

Conversely, the average yield closed flat at the mid-segment. The 10-year, 20-year FGN bonds and 30-year paper held steady at 12.99%, 14.60%, and 14.63%, respectively, Cowry Asset Management said in its market report.

Elsewhere, FGN Eurobonds appreciated across all tracked maturities, reflecting sustained bullish sentiment, as the average secondary market yield contracted 25 basis points to 10.10%.  

At the monthly bond auction, the DMO had planned to N360 billion worth of bonds. However, robust system liquidity ensured that demand was robust at 2.6x the offer. This enabled the Debt Office to eventually sell N657 billion worth of local bonds at lower average rates of 13.63% from 14.94% in June.

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