Nigerian bond yields could rise next week spurred by election spending, while yields on Kenyan Treasuries are likely to fall on the government’s lower appetite for domestic debt.
Africa’s biggest economy hold presidential elections on Feb. 14 and spending by politicians to woo electorates could spill over into the fixed market.
“The expectation is that yields should be on the upward trend as we move toward election. We are expecting to see an increase in liquidity levels and some of it coming into the bond market,” one dealer said.
Traders said secondary market trading remained subdued because of uncertainty around the election, while the initial buying of the 2024 tenor debt note by some lenders has declined.
Nigeria plans to raise 90 billion naira ($465.72 million) in sovereign bonds with maturities ranging between five and 20 years at its next regular auction on Feb. 11.
The 5-year debt note is a fresh issue, while the 10-year and 20-year bonds are re-openings of previously issued paper.
Traders said interest in the new issue could rise, while returns on the paper is expected to set the benchmark for the pricing of other bond tenors at the secondary market.
Yields on the 2016 debt note fell to 14.99 percent from 15.03 percent last week. The 2022 paper was trading at 15.21 percent against 15.20 percent, while the 2024 bond was trading around 15.21 percent against 15.06 percent last week.
A reduction in Kenya’s weekly domestic borrowing target and improving liquidity in the money markets could lead to higher subscription rates from investors, putting downward pressure on Treasury bill yields next week.
“This will push the yields down,” said John Njenga, a trader at Commercial Bank of Africa.
The central bank has reduced the amount of debt it plans to raise through Treasury bills next week by a third to 8 billion shillings ($87.59 million). The government plans to cut borrowing this fiscal year by about a quarter.
The weighted average interest rate for banks on the overnight market fell for the third straight day on Thursday, showing the easing of liquidity conditions.
During this week’s debt auction, the yield on the 91-day Treasury bill edged up to 8.582 percent.
Yields on the six-month and one-year Treasury bills also inched up to 10.362 percent and 10.987 percent respectively.