Benchmark Yield On FGN Bond Increases To 18.76%

FGN Bond For Jan. 2021 Oversubscribed

The Federal Government of Nigeria’s (FGN) bonds’ benchmark yield increased marginally to 18.76% on Wednesday as a result of selloffs that were sparked by a decline in secondary market mood.

In an effort to lower the cost of government borrowing, the Debt Management Office (DMO) has maintained spot pricing tight, which has resulted in low interest rates on Nigerian bonds.

Considering that both inflation and interest rates are in the double-digit high range, negative interest rates have deterred some investors from purchasing Nigerian bonds.

The Nigerian government saw slight selloffs on Wednesday in the secondary market, or what some analysts refer to as soft profit taking, as a result of the debt office’s unmet expectation that it would adjust rates to reflect shifting market conditions.

Relatively lower spot rates offeredbond in the past bonds auctions caused yields to be inverted, giving a more juicy spot rate pricing by the Central Bank on Treasury bills auction sales.

While the bond secondary market was mostly calm yesterday, the average yield increased slightly by 1 bp to 18.67%, separate analysts reported. In its market update, Cordros Capital Limited stated that across the benchmark curve, the average yield expanded at the short (+4 bps) end. The yield surge was supported by investors’ decision to offload the MAR-2025 FGN bond, which pushed its yield up by +11 bps.

However, yield was unchanged in the mid- and long-term segments. Thus, the average secondary yield stayed muted at 18.76%, despite yield expansions of 0.11% and 0.05% in the MAR-25 and JAN-26 FGN papers.

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