The secondary market saw a slight fall in the average yield on Nigerian government bonds, to 19.3%, as a result of increasing demand from domestic market players. Despite expectations of an inflation increase, demand for naira assets has been driven by improved mood in the Nigerian financial sector.
Despite a continuous rise in the benchmark interest rate, the inflation rate is predicted to print higher in March 2024 compared to the reading of 31.70% in February. The contractionary economic policy stance of the monetary authority has not been able to stop the short-term escalation of the inflation rate.
The Nigerian debt office (DMO) will hold a main market auction on Monday to sell instruments valued at approximately N450.00 billion through the reopening of the 18.50% FGN FEB 2031 and 19.00% FGN FEB 2034 papers, as well as the fresh issue of a FGN APR 2029 bond.
Given the liquidity level in the financial system, supported by rising demand for government instruments, analysts said they expect demand to come strong. Naira Suffers Big, CBN Goes Ballistic Against FX Whales
In the secondary market for government bonds, traders witnessed sustained bullish sentiments from last week. This cause the average yield to decline by 4 basis points to 19.3%.
Traders said across the benchmark curve, the average yield expanded at the short (+2bps) end. The yield surge at the short end came following sell pressures on the APR-2029 (+36bps) bond.
On the other hand, yield contracted at the belly of the curve, losing 8 basis points, and long end which resulted to 2bps drop in yield. The yield movement was driven by investors interest in the FEB-2031 (-17bps) and JUN-2053 (-25bps) bonds, respectively.
In its projection, Cordros Capital Limited said the outcome of this month’s FGN bond auction holding on Monday will influence the sentiments in the secondary market.
“.. we maintain that yields in the FGN bond secondary market will remain elevated in the short term, given the anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics”, fixed income traders said.
