Breaking the Mold
Contrary to our bearish expectations, Nigeria’s fixed income market exhibited remarkable strength in August 2024. Despite concerns about rising yields due to economic pressures, both the Nigerian Treasury bills (NT-bills) and FGN bonds segments witnessed robust demand.
The NT-bills market saw a significant decline in average yields, decreasing by 397bps month-on-month (MoM) to 21.21%. This was driven by increased investor interest and repricing across all tenors (short-tenor: -307bps MoM, mid-tenor: -430bps MoM and long-tenor: -349bps MoM). Similarly, the average yield in the FGN bond market fell by 80bps MoM to 18.96%. The decline in bond yields suggests a strong appetite for longer-term securities, possibly fueled by expectations of declining inflation and less hawkish CBN. Overall, the Naira fixed income market concluded August on a positive note, with the average yield contracting by 239bps MoM to 20.08%. The strong investor appetite for government securities, as evidenced by the significant drop in yields across the NT-bills and FGN bonds markets, also highlights the resilience of the fixed income market amid challenging economic conditions.
In September 2024, we anticipate a moderate increase in liquidity in the Nigeria fixed income market. This is primarily due to the maturity of NGN568.20bn in treasury bills and NGN600.99bn in bond coupon payments. Regarding market performance, investors’ sentiment will likely be influenced by expectations surrounding potential interest rate changes ahead of the CBN MPC meeting.
Weekly Commentary and Stock Recommendation: 7th October – 11th October 2024