The Federal Government of Nigeria (FGN) bonds’ benchmark yield decreased as a result of strong secondary market buying. The fixed income market has continued to see negative interest rates, even while the yield on Treasury bills has remained high.
After the Central Bank of Nigeria (CBN) increased the interest rate on bills in an effort to draw in foreign investors, investors have begun to express interest in short-term borrowing products. This led to the debt market’s inverted yield.
Reports from the fixed interest securities market indicate that on Thursday, purchasing interests were seen in the secondary market near the midpoint (-5bps) of the curve. Due to shifting market dynamics, traders saw that market players are anticipating the debt office auction scheduled for May 2024 and spot rate changes.
Investment in government instrument is exposed to inflation uptrend. Inflation rate printed at 33.20% in March while estimates show there would be further uptick in April. The gap between inflation (33.20%) and benchmark interest rate (24.75%) widened to 8.45% in March.
Given the pattern of trading activities with mild buying interest in the APR-32, FEB-31, and JUN-33 maturities, the average yield on FGN bonds declined 2basis points, settling at 18.92%.
Traders said the average yield expanded slightly at the short (+1bp) end driven by sell pressures on the MAR-2025 (+3bps) bond but contracted at the mid (-9bps) segment as investors demanded the APR-2032 (+14bps) bond. Meanwhile, the average yield stayed flat at the long end.
