The benchmark yield on the Federal Government of Nigeria (FGN) bond fell below 19% in the secondary market due to increasing demand from domestic investors following a stronger economic performance in the second quarter of the year.
According to data, Nigeria’s gross domestic profit increased by 3.19% during the country’s first disinflation. Economic reform would put Nigeria on the path to progress, economists said, pointing out that negative naira fluctuations remain the elephant in the room.
According to market consensus, the consumer price index will fall further in the remainder of the year, reducing the negative real return obtained on fixed income securities investments.
Market analysts said the moderation in negative real return to 6.65% in the fixed income market as a result of inflation rate (33.40%) versus benchmark interest rate (26.75%) has been responsible for the ongoing rally in the secondary market.
Already, the Debt Management Office has started to reduce bond supply at the primary market as the authority has met more than 70% of the 2024 target in the debt market. Surprisingly, the debt office sold more than the total offer at the last auction, raising expectation that bond supply might improve again in the September auction.
Yesterday, the bond market rallied. Hence, yield contraction was seen at the short (-20 bps), mid (-18 bps), and long (-15 bps) segments of the curve. Fixed interest securities analysts at AIICO Capital Limited said in a note that most of the interest was directed towards the 2031 and May 2033 FGN bonds.
Across the benchmark curve, Cordros Capital Limited told investors that the average yield declined at the short (-12 bps), mid (-10 bps), and long (-15 bps) segments.
Analysts attributed the yield contraction across the tenor to demand for the JAN-2026 (-32bps), JUN-2033 (-25bps), and APR-2037 (-95bps) bonds, respectively. The market ended bullish with an 18-bps decline in the average yield to 18.78%.
