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FGN bonds yields drop as liquidity spurs rally

Nigeria’s bond market rallied on Thursday in the secondary market as a healthy liquidity level in the financial system spurred demand for debt instruments amidst inflation concerns.

With pockets of cash available, there was moderate demand in the secondary market. On the other side, some investors rebalance their portfolios in a bid to optimise return.

“Inflation and weak local currency are downsides to optimal asset portfolio construction for most asset management or fund managers at the moment but there is a possibility for higher return when the government demands increase”, an investment banking expert told MarketForces Africa.

Bondholders and asset/fund managers locked in funds after interest rates jumped while inflation continues to eclipse real return on naira assets.

The market witnessed stable prices in the secondary market due to a relatively quiet proceeding, albeit, with a bullish tilt. The average FGN bond yield on the secondary market contracted to 13.98%.

In its market note, analysts at Cowry Asset Management Limited said the 30-year debt was 69 basis points richer, yielding 15.66%, 11 basis points lower from 15.77%.

It was noted that the 10-year, 15-year, and 20-year FGN bond yields held steady at 12.55%, 14.81%, and 15.58%, respectively on account of moderate volume record transacted.

Elsewhere, Cowry Asset Managers said the value of the FGN Eurobond closed higher for most of the maturities amid renewed bullish sentiment; consequently, the average secondary market yield decreased to 12.11%.

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