Return on Nigeria's 20-Year Bonds Jumps to 15.05%
Patience Oniha, DMO Boss

Return on Nigeria’s 20-Year Bonds Jumps to 15.05%

Trading activities in the secondary market ended on a mixed note, albeit, with a bearish tilt as local investors offloaded part of their Federal Government of Nigeria’s (FGN) 20-year bond holdings, thus pushing its associated yield to 15.05%.

Ahead of the primary market auction schedule by Debt Management Office, Nigerian banks, Pension Fund Administrators (PFAs) and other Asset Management firms exited positions to reposition their books as part of their strategies to optimise portfolio returns.

DMO will conduct its first FGN bond auction in the year on Jan. 30 to roll over 13.98% FEB 28, 2.50% FGN APR 2032, 16.2499% FGN APR 2037 and 14.80% FGN APR 2049 bonds, detail from its borrowing calendar shows.

The mixed trading session in the over-the-counter debt capital market saw FGN bond prices flat for most maturities, though the average secondary market yield expanded by 4 basis points to 12.97%. The yield on the 20-year paper increased by 30 bps or 0.30% to 15.05%, according to market analysts at Cowry Asset Management Limited.

However, fixed income analysts stated in their market briefs that the yields on the 10-year, 15-year, and 30-year bonds stayed steady at 13.90%, 13.50%, and 14.90%, respectively. >>>Nigeria’s 10-Year Bond Yield Falls 280bps to 12.24%

MarketForces Africa reports that there have been yield reversals across tenored in the secondary market segment of the local debt capital market. Investors had re-priced their expected returns as the high inflation rate dragged real yields negative.

Nigeria’s Inflation data for December shows that the consumer price index moderated by 13 basis points to 21.34% ahead of the monetary policy committee meeting. Investors are waiting for a fresh catalyst to drive yield repricing in the market.

Fixed income analysts are projecting an upward movement to the yield curve ahead of 2023 borrowing plan.

“The expected increase in government borrowing is a key driver of our outlook for elevated rate in the local debt market. Moreover, the Eurobonds market would remain an unattractive financing source due to high borrowing cost”, Meristem said in its outlook for the year.

Across the FGN Bonds benchmark curve, traders said the average yield closed flat at the short and mid segments but expanded at the long (+12bps) end as investors sold off the APR-2049 (+60bps) bond.

Trades were relatively quiet today, with the average bond yield expanding by 4bps. Notably, we saw selling pressures concentrated on the JUL-2045 and APR-2049, which led to 29bps and 60bps upticks in the respective bond yields.

Elsewhere, the value of the FGN Eurobond increased for all of the maturities tracked amid renewed bullish sentiment. Consequently, the average secondary market yield decreased by 26 basis points to 10.25%, Cowry Asset traders said. #Return on Nigeria’s 20-Year Bonds Jumps to 15.05%

>>>Nigeria Economic Growth to Slow Down in 2023 –GlobalData Forecasts