Investors and bondholders refused to abandon Federal Government of Nigeria (FGN) bond purchases in the secondary market after disinflation increased the real return on naira assets.
The market closed on a mixed note, albeit with bullish mood, as investors refilled their portfolios ahead of the next auction slated for September 23. The buying momentum in the over-the-counter market was fueled by investors’ hopes that the Debt Management Office (DMO) would limit bond issuance during the primary market auction.
From the beginning of the year till now, the debt office has raised approximately N5 trillion from the debt capital market, with pension fund administrators and local banks placing the majority of the wagers.
On Wednesday, traders said in their separate updates that it was a quiet day in the bond market, with some buying interest observed at the mid-segment (-3 bps) and long end (-2 bps) of the curve.
Buying interest in the MAY 33 FGN bond caused its yield to decline by -24 bps, while demand for JUN 53 FGN paper dragged its yield lower by -20 bps. As a result, average yields on FGN bond instruments contracted by a basis point to close at 18.83% in the secondary market.
Today, the local FGN bond market had two distinct periods, AIICO Capital Limited said. Analysts explained that earlier in the day, there was selling interest in specific bonds (2031s and May 2033 papers).
However, towards the end of the market session, there was a resurgence of market bids, especially for the May 2033 paper, as investors looked to take advantage of the high yields. “We expect the buying interest to persist tomorrow,” the investment firm said.
Analysts at Cordros Capital Limited stated that across the benchmark curve, the average yield closed flat at the short and mid segments, but declined at the long (-2 bps) end due to demand for the JUN-2053 (-20 bps) bond.
