Nigerian fixed-income market showed some positive signs in May 2023 as average T-bills and bond yields decreased by 168 basis points and 14 basis points, attaining 5.48% and 13.26% respectively in the secondary market, Meristem Securities discloses in its latest Macro and Market Insight report for May 2023.
The investment outfit stated that on the contrary, other African bond values experienced a decline due to various vulnerabilities across countries.
This trend has been consistent in the African bond market this year, primarily driven by concerns over fiscal sustainability, currency depreciation, and weak economic growth forecasts.
As a result, the Bloomberg African Bond Index recorded its highest month-on-month decline of 5.88% in 2023.
In the bonds market, there was increased buying activity observed for certain instruments, including Mar-2024 (+2.90% MoM), Feb 2028 (+1.13% MoM), and Nov-2028 (+0.35% MoM).
In the T-bills market, buying interest was more widespread, resulting in noticeable price increases across the yield curve. The price appreciation was primarily driven by high subscription levels and unmet demand in the primary market.
The primary market auctions in May saw a significant level of subscription. T-bills recorded a total subscription of NGN2.35 trillion against an offering of NGN324.43 billion.
Consequently, the 91-Day, 182-Day, and 364-Day instruments experienced significant declines, reaching 2.29%, 4.99%, and 7.99% respectively (compared to 4.50%, 8.00%, and 8.99% previously).
For bonds, an offering of NGN360 billion was made, with a subscription of NGN478.92 billion. The FGN MAR 2050 bond accounted for approximately 70% of the subscription, resulting in a flat marginal rate of 15.80%.
However, marginal rates for the FEB 2028, APR 2032, and JAN 2042 bonds slightly increased by 10 basis points, 20 basis points, and 29 basis points respectively, reaching 14.00%, 14.90%, and 15.69%.
In the Nigerian Eurobonds market, there was relatively subdued activity for most of May, with average yields remaining around the same level as the previous month.
The announcement by the President to remove the fuel subsidy sparked buying activity in the instruments, leading to a decline in the average yield to 9.57% by the end of May (compared to 10.23% at the end of April).
