Following moderate selling activity on fixed interest instruments, the average yield on Nigerian government bonds hit 14.40%. With the assumption of an increase in the headline inflation rate, quoted prices of borrowing instruments in the secondary market plummeted.
Nigeria’s inflation rate increased to 25.8% in August 2023, and analysts predict that the trend would continue in September. Despite the increase, the government has borrowed at an exorbitantly cheap rate in the debt capital market this year.
In the secondary market, fund and asset managers boosted their purchasing momentum in the face of a scarcity of alternative investment opportunities that deliver a real return that exceeds the average inflation rate.
Trading in the federal government of Nigeria’s bond secondary market was uneven, but negative, as the average yield increased by a basis point to 14.4%.
Analysts stated that the average yield increased at the short (+4bps) and long (+1bp) ends of the benchmark curve as players sold off the MAR-2024 (+52bps) and JUN-2053 (+7bps) bonds, respectively.
In contrast, the average yield in the mid-segment fell owing to purchasing activity in the APR-2032 (-4bps) bond. Cowry Asset Management reported in its market update that there was a sell-off in the MAR-24 maturity, with average yields closing 1bp lower.
On Monday, there was bullish mood across all maturities in Nigeria’s Eurobond market, as seen by an increase in the value of the Sovereign FGN paper. Meanwhile, the average secondary market yield closed bullish by 4bps primarily driven by buying interest.
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