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Bond yields to rise on election worries

By on March 22, 2015

Nigerian bonds yields could rise next week on a possible sell off by some offshore investors due to uncertainty around the presidential elections on March 28, economic and financial analysts have said.

The described the March 28 contest between President Goodluck Jonathan of the Peoples Democratic Party and the All Progressive Congress candidate, General Muhammadu Buhari, retd, as the closest since the nation’s return to democracy in 1999, Reuters reported.

The uncertainty may cause investors to pare down their bond holdings in the run-up to the closely fought poll, according to dealers said.

A possible down grade by S&P rating agency next week could also unnerve investors and spur profit-taking, dealers said, while the yields could also be affected by the outcome of the Central Bank of Nigeria’s Monetary Policy Committee meeting on Tuesday.

Yields fell across the board at a Treasury bills sale this week where the CBN raised N167b.

The 91-day note fetched 10.79 percent, broadly flat against 10.8 per cent at the previous auction, while the 182-day paper sold for 14.7 per cent, against 14.85 per cent previously.

The one-year note attracted 15.35 per cent at the same auction, compared with 15.89 per cent at the previous sale.

“We expect any possible down grade by the rating agency S&P and the preparation for the election to trigger a sell-off next week and a subsequent increase in yields,” one dealer said.

Yields on the 2016 debt closed lower at 16.03 per cent on Friday, compared with 16.15 per cent last week, while the 2022 note rose to 16.99 per cent against 16.03 per cent previously.

The benchmark 2024 paper fell to 16.35 per cent from 16.63 per cent last week.

Meanwhile, investors in Kenyan debt will focus on the sale of a 12-year infrastructure bond worth 25 billion shillings ($273m), which is expected to draw interest due to its fairly high yield.

Reuters reported that Kenya’s central bank would auction the bond along with Treasury bills of all maturities, during two separate auctions next week, but fixed income traders anticipated the infrastructure bond to be auctioned on March 25 will be the main highlight.

 

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