Nigerian bond yields seen rising

Increased demand for Nigerian government bonds from local pension funds this week buoyed debt note prices after four weeks when falling global oil prices and a rapid decline in the value of the naira currency had forced offshore investors to gradually exit.

Traders said most offshore investors stayed on the sidelines this week, while the pension funds took the front seat in the local debt market of Africa's biggest economy.

"The offshore investors might further cut back on their bond holdings as we gradually approach the year end, but this will depend on the broader outlook for the local economy and the performance of global oil prices," another dealer said.

The naira currency weakened to 166.15 to the dollar on Thursday, hovering around a 7-month low before the central bank intervened by selling an undisclosed amount of dollars in the market, strengthening it to 164.70 to the dollar on Friday.

Yields on the benchmark 2024 bond fell 19 basis points to 12.62 percent on Friday, against 12.81 percent last week. The 2022 paper traded at 12.66 percent, down from 12.88 percent last Friday.

"The market experienced increase in local demand for bonds this week, due largely to improved liquidity and a slowdown in the sell-off of offshore investors," one dealer said.