Demand for local bond rise, boost naira value

Foreign Portfolio Investors (FPI) piled up demand on Nigeria's most liquid fixed income assets on Thursday, pushing down yield by 40 basis points on the country's 10-year bond, traders said.
Yield on the 10-year bond fell to 13.90 percent on the secondary market as foreign investors locked up yield at an attractive level.
Analysts said the rise in demand for fixed income in Africa's largest economy is an indication that uncertainty that characterised the general election has eased following the conclusion of the presidential election and the announcement of the winner.
President Mohammadu Buhari was declared the winner of last Saturday's presidential election, defeating his closest rival Atiku Abubakar of the main opposition party.
The bond dropped to 14.3 percent in the previous day’s trade, its lowest in six months, from 14.5 percent the day before and 14.75 percent the day before Saturday’s election.
Bond yield usually drops when there is an increase in demand while returns of the fixed income rise when investors sell down on their position.
The local currency also benefited from the increased demand for bond as the naira firmed against the dollar on the investors' forex window.
The naira firmed to 360.99 to the dollar on the market compared with 361.50 the currency opened earlier in the day.
It closed flat on the parallel market at 360 to the dollar, while the naira was quoted at 306.80 on the official window, supported by the central bank.
Traders said the naira is seeing strengthening in the coming week as the dust generated by the battle for the nation's highest position settles.
They also expect more inflows into the bond market especially after a debt auction this week attracted more than 10 times the amount the government had offered to sell.
“There’s a lot of foreign interest in bonds and that’s helping the naira strengthen. I expect more flows next week as yields remain attractive at current levels,” one trader said.