Yield Slides as Investors Appetite for Bonds Rises
The average yield retreated in the secondary market as investors showed interest in Nigerian government bonds. The fixed income market turned bullish ahead of the midweek Treasury bills auction.
Nigeria’s bond yield remains elevated, and it has continued to act as a catalyst for increased demand and sustained portfolio adjustments via secondary market trading.
Activities in the bond market have always been driven by wealth managers and institutional and retail investors, including local banks. Pension Fund Administrators (PFAs) have pumped significant amounts from the pension fund into Nigeria’s securities.
Despite elevated yield levels, investment in government assets is exposed to fast-rising inflation. The interest rate is expected to be adjusted in February as analysts expect the authority to extend monetary policy tightening.
Investors were seen taking bets at the short and long durations amidst a plan to rebase Nigeria’s consumer price index to reflect the true inflation rate and economic balance sheet positions.
In their separate report, the investment firm said buying interest was prevalent in the bond market, particularly at the short end of the curve, with the 26s (-26bps) reporting the highest trade volume at N30.6 billion.
The primary focus of interest was on the bonds maturing in February 2031 and January 2035. As a result, the average mid-yield decreased by 5 bps, settling at 20.26%.
Hence, the Feb-31 and Jan-35 instruments eased by 16 bps and 15 bps, settling at 22.22% and 19.20%, respectively, while the Apr-29 paper was offered at 21.75%.
The prevailing cautious sentiment is likely driven by anticipation of the first MPC meeting of the year, scheduled for February 17th and 18th, according to TrustBanc Financial Group Limited. #Yield Slides as Investors Appetite for Bonds Rises
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