There are indications that investors will reduce holdings of long-dated papers due to increased negative returns.
The Debt Management Office’s (DMO’s) release of N2.5trillion February Bond Auction circular midweek roused a reaction in the bond market, being the highest monthly offer.
Accordingly, investors anticipate the interest rates, increasing demand for short-dated papers and reduced holdings of long-dated papers. Thus, the average benchmark yield rose to 16.17percent from 15.51percent recorded in the previous week
Dealers said Nigeria’s naira bonds and treasury bills, priced in the local currency, are turning out to be something investors from abroad want to stay away from as the country’s high inflation makes the yields on those assets unattractive for them.
Analysts from investment banking firm, Afrinvedt (West) Africa Limited said the sharp increase in the headline inflation rate was jointly driven by the persistent pressure from both the food and core Consumer Price Index (CPI) sub-baskets.
Looking ahead to February, “we opine that risk factors remain tilted to the downside. Although the FG has commenced move to clamp down on food hoarding and direct the release of grains from the strategic reserves, we are less optimistic about meaningful relief from this move (especially in the near term) given that a sizeable share of food supply in Nigeria is imported.
“Amidst these developments and sustained volatility in the FX market, we estimate that the y/y headline inflation rate will increase by 2.1ppts to 31.9 percent in February, “ the analysts stated.
and then