Yields on Nigerian bonds could edge higher next week after turbulence in the money markets following the postponement of a presidential election in Africa’s biggest economy.
Kenyan debt yields are seen falling on rising demand.
NIGERIA
Yields on Nigerian bonds are expected to stay flat or rise slightly next week after rising over 100 basis points due to a sell-off as uncertainty persisted in Africa’s biggest economy.
Traders said some local pension and assets managers were trimming their positions, prompted by the local currency’s bleak outlook. The central bank’s intervention to sell dollars to prop up the naira failed to ease their concerns.
“A number of investors are selling their bonds because of the negative outlook on the economy by Standard and Poor and fear the naira could lose more value ahead of the election,” one trader said.
Standard and Poor’s on Tuesday placed Nigeria on credit watch negative.
The yield on the 2016 debt note rose to 16.15 percent on Friday, from 14.99 percent last week.
The 2022 debt note closed at 16.68 percent against 15.21 percent, while the 2024 bond was closed at 16.70 compared with 15.2 percent last week.
“We actually expect some rearrangement of portfolios next week and some investors covering their short positions,” another dealer said. “Yields should stay flat or at most slightly higher by next week.”
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KENYA
Yields on Kenyan Treasury bills and bonds are expected to fall next week due to increased shilling liquidity that will likely spur huge demand for the debt, traders said on Friday.
Government salary payments and allocations to regional governments made in January as well as Treasury bond redemptions had led to increased liquidity in the market, traders said.
“We’re expecting liquidity… to influence next weeks’ bond auction yields lower,” Alexander Muiruri, fixed income analyst at Kestrel Capital, said.
“The subscription rates will continue to be high on Treasury bill auctions as CBK reduces its activity in the OMO,” he said referring to the Central Bank of Kenya’s Open Market Operations.
The weighted average yield on the 91-day Treasury bill fell this week to 8.563 percent from 8.582 percent last week.
The yield on the 182-day bills rose to 10.403 percent from 10.362 percent. The yield on the 364-day paper fell to 10.942 percent from 10.987 percent.
The central bank will sell a new two-year and a re-opened 10-year bonds worth a total 25 billion shillings ($273.37 million) next week.
The weighted average yield on the two-year bond rose to 10.890 percent at its last sale in December from 10.764 percent previously. The yield on the 10-year bond rose to 12.296 percent at its last auction in September from 12.180 percent previously.
The 91-day, 182-day and 364-day Treasury bills worth a total of 8 billion shillings will also be on sale next week.
