Yield Slumps to 14% Ahead of Inflation, Bond Auction

Yield Slumps to 14% Ahead of Inflation, Bond Auction

The average yield on the Federal Government of Nigeria (FGN) bonds declined to 14% as the asset, fund managers went into solitary ahead of inflation data, and debt management office (DMO) auction sales on Monday.

Nigeria’s debt office will be offering instruments worth N360.00 billion through re-openings of the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 13.00% FGN JAN 2042, and 12.98% FGN MAR 2050 bonds.

Simultaneously, the National Bureau of Statistics is expected to release inflation figures for the last month. Headline inflation for March printed higher at 22.04% following the Nigerian naira crisis in the first quarter of 2023.  A slew of fixed income securities analysts said they expect the result of the May 2023 FGN bond auction to influence the sentiments in the secondary market

In the secondary market, FGN bonds traded at the secondary market were relatively flat for most maturities, The market was range-bound throughout the week, with investors trading cautiously.

Notably, the yields of the 20-year 16.25% FGN MAR 2037 debt and 30-year 12.98% FGN MAR 2050 bonds were unchanged at 15.23% and 15.83%, respectively. On the flip side, the yield on the benchmark 10-year 16.29% FGN MAR 2027 note dipped two basis points to 12.73% (from 12.84%).

Given a pocket of transactions seen last week, fixed income securities traders reported that the value of the 15-year 12.50% FGN MAR 2035 paper, lost N1.02 as its corresponding yield climbed to 14.96% from 14.75%.


According to analysts note, some market participants, fixed income securities investors cherry-picked instruments with attractive yields across the curve, particularly at the mid and long-tenor instruments.

As a result, the average yield across instruments contracted by 9 basis points to 14.0%. Across the benchmark curve, the average yield dipped on the short-end (-37bps) instruments, due to interest on the MAR-2024 (-173bps) bond.

Yields however expanded on the long-end instruments, losing 3 basis points following profit-taking on the MAR-2035 (+21bps) bond. Meanwhile, the average yield was flat at the mid-segment.

Analysts gauged the temperature in the fixed income market, saying, sentiment in the secondary market was mixed despite the buoyant liquidity in the system.

Most of the trading efforts were concentrated at the near and mid ends of the curve, amidst preparation for Monday’s auction exercise, TrustBanc Capital Limited said in a note. 

Offer for Mar-35 (+21bps) maturity submerged bids for Mar-27 (-11bps) and Mar-25 (-2bps) papers. As a result, the average yield closed at 14.31% week-on-week, barely above last week’s 14.30%. #Yield Slumps to 14% Ahead of Inflation, Bond Auction

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