Nigeria's Bonds Mixed Amidst Inflation Concern
Patience Oniha, DG, Debt Office

Nigeria’s Bonds Mixed Amidst Inflation Concern

Nigeria’s bond market opened trading activity for the week on a quiet note, albeit with moderate buy-side bias. Fund/Asset managers were in solo mood as prices were essentially flat across most maturities.

Despite a thin trading session, the average yield in the secondary market contracted marginally to 13.46% ahead inflation figure. This week, the National Bureau of Statistics is expected to release the inflation figure for May 2023.

In April, headline inflation accelerated to 22.22% over the naira redesign policy crisis, however, before fuel subsidies removal in May. Considering the increase in the pump price of petroleum, analysts have projected that the inflation rate will double down in 2023.

The steep headline rate is however affected the return on naira assets in addition to weakening local currency, combine, these have been putting pressure on individuals and corporate entities’ finances.

Return on fixed income instruments is miles away from average inflation conditions. But analysts said the government is not expected to cover exposure to inflation on risk-free borrowing instruments – Bonds, Treasury bills.

In the market, thin transactions were consummated across tenor buckets, fixed-income securities analysts told MarketForces Africa, particularly on mid- and long-dated securities, said Cowry Asset Management in a note to investors.

Traders at Cordros Capital Limited said in a note to investors that across the benchmark curve, the average yield was flat at the short end but contracted at the mid (-2bps) and long (-1bp) segments.

The firm noted that fixed interest securities investors demanded the APR-2032 (-3bps) and MAR-2050 (-5bps) bonds, respectively. The investment firm said the 10-year and 30-year FGN Bonds yielded around 14.23% from 14.24% and 15.57% from 15.62% respectively. Meanwhile, the 20-year FGN bond yield held steady at 15.41%.

Elsewhere, the value of the FGN Eurobond closed higher for most maturities on sustained bullish sentiment; consequently, the average secondary market yield contracted to 11.29%.

TrustBanc Capital Limited said the investment firm observed a moderate volume of bids at the near and far ends of the curve, mostly on the Feb-28 and Mar-50 maturities.

The bulls greeted the trading week with an avalanche of bids for securities across the Nigerian curve. “We believe the market reacted to the change of Guard at the apex bank, as well as key policy initiatives of the President Bola Tinubu administration”, TrustBanc Capital added. #Nigeria’s Bonds Mixed Amidst Inflation Concern

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