Yield Hits 19.8% as Uncertainties Stoke Selloff in Bond Market
Bond market investors reduced their interest in the Federal Government of Nigeria’s (FGN) long-term borrowing securities in the secondary market due to unpriced risks emanating from nationwide protests.
Inflation rate has crossed the resistance line, while interest rate has accelerated to 26.75% while exchange rate continues to fluctuate negatively. Investors are weighing the impacts of changing market dynamics on portfolio performance. This has cause some adjustment in line with market dictates.
The market is pricing uncertainties into their investment play in the fixed interest securities secondary market. The authority has seen investors’ reactions at the recent primary market auction.
Market expects yield repricing given widening gap between current inflation and benchmark interest rates figures. Despite robust system liquidity, selling pressure persisted in the domestic bond market as economic uncertainties weigh on living condition of the people.
Most of the activity skewed to the New 2029, 2031, 2033, 2038, 2050, and 2053 FGN papers, traders said in separates market updates reviewed by MarketForces Africa.
However, the Mar 2027s FGN Bonds saw selloffs, its yield expanded 19 basis points to settle at 20.20% on Friday. The market closed on a bearish note, with the average benchmark yield increasing by 32 basis points week-on-week, reaching 19.80%.
Fixed income securities traders said across the benchmark curve, the average yield increased at the short (+33 bps), mid (+11 bps), and long (+22 bps) end of the segments.
The yield expansion was due to sell pressures on the APR-2029 FGN bond whose yield climbed by +121bps. The market also experience selling spree on JUL-2030 FGN bond, causing its yield to rise by 39bp and buying interest in JUN-2038 bond lifted its yield higher by +97bps.
Fixed income analysts said they anticipate local participants in the bonds secondary market will continue to reprice yields higher to reflect the elevated benchmark interest rate and significant supply profile due to expected issuances.
Last week, July 2024 Issue of the Federal Government of Nigeria (FGN) Bonds was listed on the Nigerian Exchange Limited (NGX) on Friday, August 2, 2024. #Yield Hits 19.8% as Uncertainties Stoke Selloff in Bond Market
