Nigeria’s Bond Yield Slides Ahead of DMO Auction
The average yield on Nigerian Government bonds declined moderately to 19.3% in the secondary market due to increased demand from local market participants. Improved sentiment in Nigerian financial market has helped driving demand for naira assets despite inflation surge expectation.
From 31.70% reading in February, 2024 March Inflation rate is expected to print higher despite sustained increase in benchmark interest rate. The monetary authority contractionary economic policy stance has been unable to curb inflation rate acceleration in the short term.
On Monday, Nigeria’s debt office (DMO) will conduct primary market auction to offer instruments worth over N450.00 billion through new issuance of a FGN APR 2029 bond, and re-openings of the 18.50% FGN FEB 2031 and 19.00% FGN FEB 2034 papers.
Given the liquidity level in the financial system, supported by rising demand for government instruments, analysts said they expect demand to come strong. Naira Suffers Big, CBN Goes Ballistic Against FX Whales
In the secondary market for government bonds, traders witnessed sustained bullish sentiments from last week. This cause the average yield to decline by 4 basis points to 19.3%.
Traders said across the benchmark curve, the average yield expanded at the short (+2bps) end. The yield surge at the short end came following sell pressures on the APR-2029 (+36bps) bond.
On the other hand, yield contracted at the belly of the curve, losing 8 basis points, and long end which resulted to 2bps drop in yield. The yield movement was driven by investors interest in the FEB-2031 (-17bps) and JUN-2053 (-25bps) bonds, respectively.
In its projection, Cordros Capital Limited said the outcome of this month’s FGN bond auction holding on Monday will influence the sentiments in the secondary market.
“.. we maintain that yields in the FGN bond secondary market will remain elevated in the short term, given the anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics”, fixed income traders said.
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