Yield Rises as Fund Managers Unpack Nigeria's Bonds

Yield Rises as Fund Managers Unpack Nigeria’s Bonds

The average yield on Federal Government of Nigeria (FGN) bonds spike on Thursday as fund managers slow down on ramping up fixed interest income instruments in the debt capital market.

Yields surge moderately amidst the prediction of fresh repricing ahead of inflation data for December 2022. The fixed income market has recently turned bullish as large numbers of asset managers add more local bonds to their respective portfolios.

Recall there was a sudden turn in monetary policy direction in the middle of last year, which drove fixed income yield upwards. However, yields began a downtrend at the tail-end of the year. In its outlook for 2023, Meristem said fixed income yields will increase, although at a gradual pace.

The firm said this is due to the offsetting effects of the expected higher FGN borrowings as a result of a higher budget deficit, and the expected high system liquidity from coupon payments and bond maturity, especially in the first half of the year.

Debt Management Office is expected to issue a borrowing calendar with an expectation that the authority will access more borrowings from the local debt capital market, thus giving an opportunity to reprice spot rates and the yield.

For budget deficit financing, analysts believe that the international capital market will remain an expensive alternative in 2023

In the bond market, the prices of FGN bonds remained relatively flat for most maturities monitored, according to analysts Cowry Asset Management Limited.  In contrast, the average secondary market yield expanded by 10 basis points to 12.82%, traders said.

The yield on the FGN 30-year bonds retreated by 15 basis points or 0.15% to 14.55%.  On the other hand, the yields on the 10-year, 15-year, and 20-year bonds stayed steady at 12.24%, 13.50%, and 14.77%, respectively.

Across the benchmark curve, Cordros Capital said the average yield expanded at the short (+14bps) and long (+6bps) ends as investors sold off the MAR-2025 (+51bps) and JUL-2045 (+41bps) bonds, respectively.

Meanwhile, the average yield on FGN Bonds was flat at the mid-segment.  Elsewhere, the value of the FGN Eurobond increased for all of the maturities tracked amid sustained bullish sentiment, Cowry Asset Managers told clients in an email.

Consequently, the average secondary market yield contracted by 28 bps to 10.56%. # Yield Rises as Fund Managers Unpack Nigeria’s Bonds >>>Nigerian Treasury Bills Yield Crashed to 3.4%