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The benchmark yield on Federal Government of Nigeria (FGN) bonds experienced a slight decline due to increased buying momentum in the secondary market. Despite persistent negative interest yields in the fixed income market, yields remain elevated, particularly in the treasury bills space.
Investor interest has been observed in short-term borrowing instruments, driven by the Central Bank of Nigeria’s (CBN) offer of higher interest rates on bills to attract foreign investors. This has led to an inverted yield curve in the debt market.
Reports from the fixed interest securities market indicate that buying interests were particularly noted at the mid-end (-5bps) of the curve in the secondary market on Thursday. Market participants are eagerly awaiting the debt office auction for May 2024, anticipating adjustments in spot rates in response to changing market dynamics.
Investing in government instruments is currently exposed to inflationary pressures, with the inflation rate hitting 33.20% in March and estimates suggesting a further uptick in April. The gap between inflation (33.20%) and the benchmark interest rate (24.75%) widened to 8.45% in March.
Amidst mild buying interest in the APR-32, FEB-31, and JUN-33 maturities, the average yield on FGN bonds saw a decline of 2 basis points, settling at 18.92%.
Traders noted a slight expansion in the average yield at the short end (+1bp) driven by sell pressures on the MAR-2025 (+3bps) bond. However, there was a contraction at the mid-end (-9bps) segment as investors sought the APR-2032 (+14bps) bond. Meanwhile, the average yield remained flat at the long end.
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