Last Updated on 30 May 2024 by Naijadazz
Nigeria’s sovereign bond yield curve inverted in April as rising inflation eroded real returns across all maturities, according to the latest FMDQ Exchange data.
The spread between 3-month and 10-year government bond yields narrowed to -0.06 percentage points, down 4.43 percentage points from March. This inverted the yield curve, with shorter-dated yields exceeding longer tenors.
Driving the inversion was a continued surge in consumer price inflation, which accelerated to 33.69% year-over-year in April from 32.76% the prior month. With the highest bond yield at 20% for 10-year notes, real yields remained deeply negative across the curve.
T-bills with 6-12 month maturities saw the heaviest trading volume at 4.18 trillion naira, while the 5-10 year segment was most active in bonds at 1.05 trillion naira turnover.
Overall, fixed income market activity fell 30.87% from March to 8.33 trillion naira amid lower trading intensity. The decline coincided with reduced issuance, as the Debt Management Office sold just 1.31 trillion naira in T-bills, down 50.76% from the prior month.
However, FGN bond supply ticked up 2.95% to 626.81 billion naira, even as demand outstripped offered amounts by a ratio of nearly 450% for T-bills and 139% for bonds.
Money market rates also eased, with the average O/N rate down 10 bps to 29.2% and the OPR lending rate lower by 23 bps at 28.22% as system liquidity improved.
The report highlights mounting price pressures in Africa’s largest economy and the challenges facing policymakers in reining in inflation while supporting growth.
