Benchmark Yield Dips as Investors Bet on Nigerian Bonds

The benchmark yield on Nigerian government bonds dipped slightly to 19.31% as investors increased their position in the secondary market.  Asset managers have been playing the bond markets, targeting optimized returns on their portfolios. 

The sustained demand for Nigerian bonds has been driven by elevated yields in the fixed income market – even as inflation continues to threaten returns. Market participants sought higher rates at debt office monthly auction as bonds supply eased.

This week, the inflation rate surge triggered riskoff sentiment, with selloffs on borrowing instruments lifting yields on short and longer end of the curve higher in the market. For most of the trading session this week, FGN bond yield has been steadied around 19%.

On Thursday, the local FGN bond market traded mixed to bullish, with sideways interest observed across select maturities, specifically on the Feb 2031, May 2033, and Feb 2034 papers, AIICO Capital Limited said.

In its update, Cordros Capital Limited reported that the average yield dipped at the mid (-13bps) segment.  The contraction in yield was driven by buying-interest in the FEB-2031 (-39bps) bond but closed flat at the short and long ends.

In a report, FSDH noted that the hike in rates and yields in Q3 2024 increased investor interest in the fixed-income market, putting downward pressure on FGN Bond yields during the quarter

In response to hikes in policy interest rates, yields in the bond and Treasury bill markets rose significantly. The yield on a 1-year NT-bill peaked at 26.5% in Q3 2024 before subsiding due to increased demand. Similarly, the yield on a 10-Year FGN Bond reached 20.7% as of the end of September.

As yields increased in the fixed-income market, the equity market lost momentum, with the NGX All-Share Index (ASI) recording a 1.8% loss in Q3 2024, compounding the 4.3% loss from Q2 2024.

Investor sentiment is likely to remain mixed, with some expecting higher yields in the near term and others opting to lock in the already elevated rates. Nonetheless, yields are expected to stay high and will closely follow movements in the policy rate. #Benchmark Yield Dips as Investors Bet on Nigerian Bonds NAFDAC Destroys Fake Products Worth N43bn in Ibadan