FGN Bond Yields Rally

Nigeria’s bond market experienced a rally on Thursday, fueled by a healthy liquidity level in the financial system, which triggered increased demand for debt instruments despite concerns over inflation. Investors took advantage of available cash, leading to moderate demand in the secondary market. Some investors also opted to rebalance their portfolios to maximize returns.

Although inflation and a weak local currency have posed challenges for asset management and fund managers in constructing optimal asset portfolios, there is a potential for higher returns as government demands increase, according to an investment banking expert interviewed by Daily Global News.

Bondholders and asset/fund managers seized the opportunity to lock in funds after interest rates rose, given that inflation continued to outpace real returns on naira assets.

The secondary market observed stable prices, with a slight bullish inclination. The average yield on the secondary market for Federal Government of Nigeria (FGN) bonds contracted to 13.98%. Cowry Asset Management Limited analysts noted that the 30-year debt was 69 basis points richer, resulting in a yield of 15.66%, down 11 basis points from 15.77%.

The yields for the 10-year, 15-year, and 20-year FGN bonds remained steady at 12.55%, 14.81%, and 15.58%, respectively, due to moderate volume transactions.

Cowry Asset Managers reported that the value of FGN Eurobonds increased for most maturities, reflecting renewed bullish sentiment. As a result, the average secondary market yield decreased to 12.11%.