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Nigerian bond yields to fall

By on September 23, 2014

Yields are seen falling this week after the Central Bank of Nigeria retained its benchmark rate on Friday. Traders said the bond market was attractive for buyers with the benchmark rate held at 12 per cent.

“Yields should start coming down next week in the aftermath of the rate decision and the expected increase in the liquidity level,” one trader said.

Nigerian bond yields have risen by around 10 basis point on average this week following profit taking by both offshore and local pension funds following a fall in the price of oil, and concerns on the naira.

According to Reuters, the local currency has dropped by around three per cent in the year to date, weakening to its lowest level in more than three months on Thursday due to demand pressure and dollar squeeze.

At the bond auction on Wednesday, yields rose marginally on the three-year to 11.49 per cent from 11.12 per cent at the previous auction. The 10-year tenor paper fetched 12.23 per cent, compared with 12.22 percent in August.

“The market was a seller market this week, mostly by offshore investors taking profit and playing safe because of the falling naira value,” one dealer said.

Meanwhile, the yields on Kenyan treasury bills and a 10-year bond are expected to inch higher. According toReuters, the yields on Kenyan treasury bills and a 10-year bond are expected to rise slightly, with the bond expected to see strong interest because it offers an attractive yield in a money market that is awash with cash.

 

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