Bonds Soar As President’s Inaugural Speech Boost Morale

FGN Bond For Jan. 2021 Oversubscribed

Due to a rise in demand for gilt-edged securities in the secondary market on Tuesday, the average yield on Federal Government of Nigeria (FGN) bonds decreased. Following President Bola Tinubu’s statement in favor of the market, the market reacted by increasing demand for local bonds.

President Obama’s proposal to end gasoline subsidies and switch to a market-clearing exchange rate drew criticism from influential participants in the economy.

Investors continue to anticipate greater returns on debt instruments in the secondary market, which is driving up demand for FGN bonds in the over-the-counter market. Demand levels have always been sustained by the financial system’s liquidity situation.

In light of growing inflation, Nigeria favors cheap local debt capital market borrowings over pricey Eurobond offerings. Local businesses are due a sizable portion of Nigeria’s governmental debt.

The average yield decreased by 5 basis points to 13.9% as a result of the bond market rally that followed President Bola Tinubu’s market-sensitive inauguration speech, according to dealers’ market briefings.

Despite a surge in the stock market, fund managers committed some money to debt papers. Market analysts claimed that increased interest rates and inflation had diminished the appeal of investing in the debt market, which offers lower risk but a negative actual return.

As investors flocked to the MAR-2024 (-40bps) and APR-2037 (-18bps) bonds, respectively, the average yield decreased at the short (-12bps) and long (-5bps) ends of the benchmark curve, according to Cordros Capital.

A slew of fixed income traders, and market analysts, however, spotted that the average yield expanded 6 basis points at the mid-segment following the sell-off of the APR-2029 (+11bps) FGN bond.

In the market, 20-year and 30-year FGN bonds were 101 basis points and 70 basis points richer, according to fixed income market analysts at Cowry Asset Management Limited.

These bond papers’ corresponding yields decreased 18 basis points to 15.40% and 11 basis points to 15.55% as demand increased. The 10-year and 15-year yields closed steady at 12.54%, and 14.81%, respectively.

Elsewhere, the value of the FGN Eurobond closed higher for all maturities, spurred by reports of fuel subsidy removal and the unification of exchange rates.

Consequently, the average secondary market yield compressed to 11.05%. Elsewhere, the 10-year US treasury yield inched lower to 3.7.0% as tension over the debt ceiling reduced.

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