Due to moderate selloffs of naira assets across the curve amid inflation concerns to the value of the naira, the average yield on Federal Government of Nigeria (FGN) bonds increased somewhat in the secondary market.
Investors sold FGN bonds across a range of tenors in a gloomy trading session following the debt management office’s hike in spot rates during this week’s primary market auction.
The risk-off attitude of investors caused the average yield to rise by 0.20%. The gloomy trend began the previous week as bond auction sales were scheduled for Monday.
Following a successful bond auction on Monday, the benchmark yield ended the day higher at 18.60% due to selloffs in government bonds in the secondary market segment.
The market experienced a raft of selloffs at the mid-end of the curve (+44 bps), specifically the Feb-31 (+150 bps), Feb-34 (+136 bps), and Jul-30 (+120 bps) instruments.
In its market update, Cordros Capital Limited told investors that across the benchmark curve, the average yield was flat at the short and long ends but increased at the mid (+63bps) segment following sell pressures on the FEB-2031 (+150bps) bond.
In the money market, pressures on short-term benchmark interest rates eased further. Open repo and overnight lending rates fell by 240bps and 231bps, respectively, to settle at 27.89% and 28.76%.
This week, Coronation Research expects money market rates to trend upward. The expected outflow from the monthly FGN bond auction would likely outweigh the expected inflow from FGN bond coupon payments. Nigerian Bond Yields Increased by 20 Basis Points to 18.60%
