Foreign investors pull bids worth 106.37 bln for Nigerian bonds as yields spikes

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Investors put in a total of 99 bids worth N106.37 billion for the 15-year paper this week, compared to 67 bids worth N90.89 billion at the December auction for the same tenor.

A total of N146.44 billion in bids were placed across the 2 tenors (15-year and 25-year) at the January auction, compared to N134 billion in December.

While investor demand has grown in the run-up to the DMO auction, the action has largely been from domestic institutional investors and Pension Funds as foreign investors remain on the sidelines, put off by bond yields still ways below inflation.

“High inflation, low bond yields and non-smooth functioning of the foreign exchange market means foreign portfolio investors won’t come back in a big way. There will need to be an adjustment to the current low interest rate environment,” said Razia Khan, Africa economist at Standard Chartered Bank.

Yields on benchmark 15-Year securities due 2035 rose to 8.74 percent at a government auction held Wednesday (Jan 20), up 170 basis points compared to the last auction in December, to trade around the highest level in about four months, according to data.

The Benchmark 25-year bonds due 2045 sold at a marginal rate of 8.95 percent up some 195 basis points from the last auction in December, according to data from the Debt Management Office (DMO).

The last time yields were this high at a primary auction was in September 2020, when the DMO allotted just N6.81 billion of the N40 billion on offer to investors for the 25-year paper at 8.9 percent and N25.43 billion of the N40 billion on offer for the 15-year paper at 8.52 percent,

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.