The secondary market for Federal Government of Nigeria (FGN) bonds closed on a sour note. According to dealers’ records, this increased the average yield to 14.14%. The bond market’s selloffs continued into the New Year, bringing the average yield on borrowing instruments lower.
The selloffs by asset and portfolio managers occurred amid expectations that the economy will be redirected to boost growth in 2024. However, the market is still skeptical, particularly given the growing inflationary tendency.
Inflation remained negative among macroeconomic indicators, economists said MarketForces Africa in response to New Year’s forecasts. The headline inflation rate for November was 28.2% year on year, and economists predict the consumer price index to increase further.
Based on the state of the bond market, investors continue to believe that a larger return is merited for parting with their money. The current spread between portfolio returns and inflation has grown wider.
Investors are receiving negative rates on FGN bonds, despite the fact that demand for these instruments remained strong during the debt management office’s primary market auction in 2023.
Market data revealed that there was minor negative trading activity as the average yield increased by a basis point to settle at 14.14%. Nigeria’s economic crisis is being exacerbated by the depreciation of the naira.
In Nigeria’s government Eurobond market, sell sentiment dominated across the yield curve’s short, mid, and long ends, resulting in a minor 10bps rise in the average yield to 9.72%.
