Nigeria's Bonds Rally, Returns Slump

Nigeria’s Bonds Rally, Returns Slump

The average yield on Federal Government of Nigeria (FGN) bonds declined as demand spiked in the secondary market. The local debt capital market was heated up with demand for FGN notes ahead of inflation data released by the statistics office.

For the most part of the year, the fixed interest income market has been heated up with increased demand as investors seek risk-free returns on their portfolios. This has also forced the yield curve to backtrack on major government debt instruments.

At the moment, the return on government debt is highly exposed to a steep inflation rate, with a negative on investors’ portfolios.

Contrary to analysts’ earlier predictions, yield repricing in the fixed income market has been slowed. Market analysts attribute the development to robust liquidity in the financial system – despite changes in market dynamics.

Recently, there was an uptick in spot rates on government debt instruments at the primary Debt Management Office primary market auction conducted. 

A similar scenario played out in the Central Bank of Nigeria primary market auction where spot pricing was reviewed upward as subscription levels declined. The monetary policy 17.50% benchmark interest rate has not really filtered through the market as Broadstreet analysts had expected.

In the bond market on Thursday, the prices of plain FGN bonds were largely flat for the bulk of the maturities examined, Cowry Asset Management Limited told clients via email.

However, the average secondary market yield on FGN bonds traded contracted to 13.07%, according to separate analysts report reviewed. The 10-year and 20-year FGN bonds were richer by 1.69% and 0.97%, respectively, analysts at Cowry Asset Management told clients.

Meanwhile, due to increased demand in the space, these bonds corresponding yields contracted 56 basis points and 17 basis points to 12.92% and 15.35%, respectively.  Then, the 15-year and 30-year FGN bond yields were unchanged at 14.68% and 15.00%, respectively.

Elsewhere, the value of the FGN Eurobond decreased for all of the maturities amid sustained bearish sentiment. Consequently, the average secondary market yield expanded to 12.45%. # Nigeria’s Bonds Rally, Returns Slump

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