Nigeria’s Bonds Market Rallies as Liquidity Spikes

Nigeria’s Bonds Market Rallies as Liquidity Spikes

Nigeria’s bonds average yield slumped to 13.41% following a sustained rally in the secondary market versus about 16% year-to-date return in the equities market, tracking behind inflation conditions.

The statistics office said the headline inflation rate printed higher at 22.41% in May in its consumer price index report. The surge in consumer inflation has forced the monetary authority to push interest rates higher.

In spite of all these supposed market catalysts, the average yield on government issuance has been below market expectations.
A dearth of alternative investment options and pension commission regulation that forces fund managers to position firmly in debt instruments has shaped the market.

In the secondary market, the price of FGN bonds remained relatively steady across most maturities yesterday. Notably, the average yield in the secondary, Cowry Asset said in a market note.

Elaborating on key development in the space, TrustBanc Capital Limited told investors in its note that local players bought moderate volume at the near and mid ends of the curve to halt the 3-day lull in the market.

Robust liquidity in the market drove buying interest in the secondary market space, analysts said in their separate market briefs. Interbank funding rates declined.

The liquidity level in the market settled higher at N688.52 billion. This reduces short-term fund rates. the open repo rate and the overnight lending rate dropped to single-digit levels of 8.83% and 9.00%, respectively, compared to their previous levels of 11.50% and 11.90%.

As a result, the average yield in the secondary market contracted to 13.41% due to sustained buy interest, particularly on short and mid-term bonds. Cowry Asset said the 10-year borrowing costs yielded around 13.90% in its market note as it lost 15 basis points from 14.05%.

Meanwhile, the 20-year and 30-year bond yields held steady at 15.35% and 15.60%, respectively. According to market reports, the value of FGN Eurobonds remained flat for all tracked maturities as investors remained cautious.

Consequently, the average secondary market yield stayed unchanged at 11.33%. In the secondary market for Nigerian Treasury bills, trading activities closed on a quiet note again. As a result, the average yield closed flat at 6.6%. #Nigeria’s Bonds Market Rallies as Liquidity Spikes Nigerian Treasury Bills Yield Rises to 7%