A little increase in the average yield on Federal Government of Nigeria (FGN) bonds was caused by slight selloffs in the secondary market throughout the last week.
Investors and other market players have been cautious with local bonds in the context of a restrained rate ahead of inflation and fewer bond issuances in the third quarter.
Investment banking businesses have anticipated that base effects will cause inflation to begin to decline. When evaluating the dynamics of the market, trading in the secondary market for FGN bonds was uneven, with the majority of activity being seen at the short and long ends of the curve.
As a result, according to a report from Cordros Capital Limited, the average yield increased by 2 basis points to 18.8% on Friday in the secondary market.
Fixed-interest securities traders reported the average yield advanced 8 basis points at the short end of the curve as a result of sell pressure. The yield surge followed sell pressures on the MAR-2025 (+17 bps) bond but closed flat at the mid-segment.
Conversely, the average yield pared at the long (-1bp) end as players demanded the MAR-2035 (-28bps) bond. “In the upcoming week, we envisage a possible upward repricing of yields, particularly on short-term instruments,” traders said in the note.
However, fixed-interest income analysts said they do not rule out pockets of demand on some attractive maturities, as the recently published Q3-2024 bond issuance calendar indicates reduced supply to the market.
For the rest of the year, Cordros Capital Limited said the firm maintains its medium-term expectation of elevated yields consequent to anticipated monetary policy administration globally and domestically and sustained imbalances in demand and supply dynamics.
The FGN bond market had a muted week but closed on a bearish note. Overall, the average mid-yield increased by 7 bps to 18.91%, week-on-week.
