Mr. Bismarck Rewane, M D, Financial Derivatives
Obinna Chima
Yields on FGN bonds increased across various tenors due to an anticipation of higher inflation figures for June.
The National Bureau of Statistics (NBS) is expected to release the inflation figure for June 2012 today (Wednesday). Inflation rate had decreased slightly to 12.7 per cent in May, from 12.9 per cent recorded in April 2012.
Analysts had forecast marginal increase in June inflation. For instance, the FSDH Securities Limited had predicted that the Consumer Price Index (CPI), which is used to gauge inflation rate in the country, will rise slightly to 12.9 per cent in June.
Similarly, the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, had also predicted a marginally increase in inflation.
Consequently, THISDAY checks showed that on the average yields on the actively traded FGN bonds whose maturity ranges between 2014 and 2030, climbed by 18 basis points.
Specifically, while yields on the eight FGN Bond 2014 Series one, increased by 26 basis points to 15.95 per cent as at Monday, as against the 15.69 per cent it stood the preceding Monday, yield on the seventh FGN Bond 2015 Series 2, also leapt by 16 basis points to 16.01 per cent on Monday, compared with the 15.85 per cent it was the preceding Monday.
Similarly, just as yield on the ninth FGN Bond 2017 Series 2, also climbed by 29 basis points to 16.23 per cent on Monday, from 15.94 per cent the preceding Monday, yield on the fifth FGN Bond 2018 Series two, also increased by 8 basis points to 16.13 per cent on Monday, from the 16.05 per cent it was the preceding Monday.
Executive Secretary, Financial Market Dealers Association (FMDA), Mr. Wale Abe, predicted that the fixed income market will remain attractive in the short-term considering its attractive returns. Abe disclosed that the market has recorded inflow of funds from foreign investors.
“What we are witnessing now is that foreign investors are coming in to invest in fixed income instruments. In other words, the portfolio investors are coming back as well as foreign direct investments (FDI),” Abe explained.
He also predicted that the naira will record some appreciation against the dollar considering the inflow of funds.
“There has been constant supply of forex apart from the normal sale by the CBN at the official window. We are likely to see an appreciation in naira in the short term if the risk perception of the foreign investors is not increased, this trend will continue,” he added.