The yield on Nigerian bonds has fallen as investors engage in active buying within the secondary market, particularly focusing on short-to-mid tenor bonds. The recent rise in Nigeria’s benchmark interest rate over inflation rates has re-engaged investor interest in these assets. Analysts anticipate further yield declines in the future, reflecting ongoing demand and changing market dynamics.
The benchmark yield on Nigerian bonds has experienced a decline due to heightened purchasing activity in the secondary market, with investors concentrating on short-to-mid tenor bonds. Investors who were unsuccessful in securing bids during the primary market auction are now actively seeking to increase their portfolio through secondary market acquisitions, which analysts predict will further reduce yields.
Interest among investors in local debt instruments has significantly surged, driven by the inflation protection offered by naira-denominated investments. Recently, Nigeria’s benchmark interest rate has surpassed inflation rates, thereby eliminating the negative real yields that investors faced over the past four years.
According to a report from Coronation Research, the yield curve for Nigerian government bonds has shifted from an upward slope to a downward slope over the last four years. This change indicates a trend where market interest rates have increased across all durations while the mark-to-market prices of FGN bonds have declined.
The longest-dated bonds have been particularly affected by these price adjustments. Looking forward, analysts predict a further decrease in yields for Nigerian bonds throughout 2025, as investors continue to realize profits from these assets. Recently, aggressive buying trends were noted, especially on the shorter end of the yield curve, leading to notable declines in yields for specific bonds such as FEB-28 and APR-29.
The sustained demand for Nigerian bonds resulted in decreased yields for key securities, including the April 2029, February 2031, May 2033, February 2034, and January 2035 bonds. It is noteworthy that the 2031 bond yield fell by 10 basis points to 18.40%, reflecting ongoing investor interest. Consequently, the average benchmark yield has decreased by 22 basis points, settling at 18.86%.
The decline in yield on Nigerian bonds is attributed to increased investor activity in the secondary market, particularly among short-to-mid tenor bonds. Investor confidence has returned due to positive changes in interest rates relative to inflation, which may continue to drive demand and lower bond yields in the near future. Market reactions suggest a trend towards further yield reductions as investors capitalize on attractive opportunities.
Original Source: dmarketforces.com
