1. Yields on Nigerian bonds climbed last week by around 20 basis points across the board, caused by selling pressure from some offshore and local pensions. That trend is expected to continue this week.
2. Traders said some investors were selling off their bond positions over concerns that the Central Bank of Nigeria could hike the benchmark interest rate to support the falling naira currency, according to Reuters.
3. The naira has been slipping for the past three weeks, weakened by declines in global oil prices and low inflows of hard currency into Nigeria’s debt and equity markets. “The impact of the falling naira is weighing on the bond market… some investors believe the central bank could hike interest rates to stem the rapid depreciation of the local currency,” one dealer said. Yields on the most active tenor 2022 rose to 12.65 per cent, higher than 12.28 per cent last Friday.
4. The 2024 bond closed at 12.56 per cent, up from 12.39 per cent, while the 2034 bond closed at 12.43 per cent compared with 12.29 per cent.
The CBN kept its benchmark interest rate at 12 per cent at its last meeting on September 19 on concerns over increased liquidity and rising inflation in the country.
5. However, its governor said that given high levels of bank liquidity, interest rates should be going up, but the bank had to weigh the impact on businesses of higher rates