Nigerian Bond Yield Increased by 20 Basis Points to 18.60%

The average yield on Federal Government of Nigeria (FGN) bonds climbed slightly in the secondary market due to moderate selloffs on naira assets across the curve amidst inflation threats to naira value.

Trading activity was bearish as investors sold FGN bonds across various tenors after the debt management office increased spot rates at the primary market auction conducted early this week.

Investors’ risk-off sentiment led to a 0.20% increase in the average yield. The bearish pattern started last week as investors anticipated bond auction sales on Monday.

As a result of selloffs on government bonds in the secondary market segment, the benchmark yield settled higher at 18.60% after a successful bond auction on Monday.

The market experienced a raft of selloffs at the mid-end of the curve (+44 bps), specifically the Feb-31 (+150 bps), Feb-34 (+136 bps), and Jul-30 (+120 bps) instruments.

In its market update, Cordros Capital Limited told investors that across the benchmark curve, the average yield was flat at the short and long ends but increased at the mid (+63bps) segment following sell pressures on the FEB-2031 (+150bps) bond.

In the money market, pressures on short-term benchmark interest rates eased further. Open repo and overnight lending rates fell by 240bps and 231bps, respectively, to settle at 27.89% and 28.76%.

This week, Coronation Research expects money market rates to trend upward. The expected outflow from the monthly FGN bond auction would likely outweigh the expected inflow from FGN bond coupon payments. Nigerian Bond Yields Increased by 20 Basis Points to 18.60%

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