Yields on Nigerian bonds climbed this week by around 20 basis points across the board, caused by selling pressure from some offshore and local pensions. That trend is expected to continue next week.
Traders said some investors were selling off their bond positions over concerns that the central bank could hike the benchmark interest rate to support the falling naira currency.
The naira has been slipping for the past three weeks, weakened by declines in global oil prices and low inflows of hard currency into Nigeria's debt and equity markets.
"The impact of the falling naira is weighing on the bond market... some investors believe the central bank could hike interest rates to stem the rapid depreciation of the local currency," one dealer said.
Yields on the most active tenor 2022 rose to 12.65 percent, higher than 12.28 percent last Friday.
The 2024 bond closed at 12.56 percent, up from 12.39 percent, while the 2034 bond closed at 12.43 percent compared with 12.29 percent.
Nigeria's central bank kept its benchmark interest rate at 12 percent at its last meeting on Sept. 19 on concerns over increased liquidity and rising inflation in Africa's biggest economy. However, its governor said that given high levels of bank liquidity, interest rates should be going up, but the bank had to weigh the impact on businesses of higher rates.
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