Nigeria's Bonds Trade Quiet ahead of Major Policy Decision

Nigeria’s Bonds Trade Quiet ahead of Major Policy Decision

Ahead of the Central Bank of Nigeria (CBN) monetary policy committee decision (MPC) on the benchmark interest rate, the average yield on Federal Government (FGN) bonds steadied on Monday, traders said.

The local debt capital market will see the issuance of government instruments worth N1.2 trillion in the first quarter of 2023, according to Debt Management Office (DMO) auction calendar.

This expectation has triggered portfolio reshuffles across the fixed income market amidst a double-digit inflation rate in Nigeria. The yield curve has been lowered following a large flood of funds that push demand for government instruments higher.

Driving growth in pension assets, Pension Fund Administrators (PFAs) funds allocation to bond-buying has been massive, supported by other wealth managers, and institutional investors seeking returns on investment.

In the bond market, FGN bonds remained largely flat for most maturities yesterday, according to Cowry Asset Managers. According to analysts’ notes, the average secondary market yield compressed further by 2 basis points to 13.40%.

Specifically, the yield on the 10-year paper decreased by 388 basis points (3.88%) to 13.36%, Cowry Asset stated.  Meanwhile, the yields on the 15-year, 20-year, and 30-year FGN bonds closed steadily at 14.58%, 15.29%, and 15.03%, respectively.

Across the benchmark curve, Cordros Capital market analysts said the average yield dipped at the short (-7bps) end as investors demanded the MAR-2027 (-54bps) bond. However, the average yield closed flat at the mid and long segments.

Elsewhere, the value of the FGN Eurobond decreased for most of the maturities tracked amid renewed bullish activity. Notably, the average secondary market yield stayed flat at 10.30%. #Nigeria’s Bonds Trade Quiet ahead of Major Policy Decision

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