Yield Slumps as Investors Increase Bets on Nigerian Bond
The benchmark yield on Nigerian government bond fell below 19% as investors’ increased debt market asset holdings via secondary market demand. Buying interest crashed yield as market looks forward to Debt Management Office (DMO) primary market auction.
The DMO shifted its monthly bond auction by week due to holiday. The bond market calendar shift in September mirrored the August experience. Last month, the Debt Management Office postponed its auction by a week and reduced the offer size from N300 billion to N190 billion.
This move suggests a possible reduction in the government’s borrowing needs, potentially due to frontloaded borrowing in Q1:2024, a shift toward an expansionary environment, or the exploration of other funding options such as domestic dollar bonds, Meristem Securities said in a note.
The market expects the authority to reduce bond supply at the primary market auction to N190 billion versus N300 billion due to frontloading of assets. In the bond market, trading activities on local assets were relatively quiet as investors continued to digest the inflation slowdown.
Traders said they observed investors acquire papers on the mid segment of the curve (-2 bps) and sell-offs on the short end of the curve (+1 bps). 2031 FGN bonds, May 2033 papers, Feb 2034s bond, and 2053s saw increased demand in the secondary market.
Thus, the average mid-yield decreased, and analysts said they anticipate more buying interest this week, supported by coupon inflows. Across the benchmark curve, the average yield expanded at the short (+1bp) end due to the selloff of the JAN-2026 (+5bps) bond but declined at the mid (-1bp) segment.
The yield contraction was due to interest in the JUN-2033 (-6bps) bond. However, the average yield remained unchanged at the long end due to thin trading activities. Overall, the average yield stayed flat at 18.84%.
“We anticipate a sustained gradual downtrend in yields, as the spiking yields in the fixed income market are beginning to wane off, as evidenced by reduced auction offers and declining yields, even in OMO auctions.
“Although, yields are still expected to remain at elevated levels as liquidity will play a crucial role in influencing rate movement,” traders said. #Yield Slumps as Investors Increase Bets on Nigerian Bond Oando Jumps by 1,154% from 52-Week Low as Market Price in Acquisition
