Nigeria bond yields plunge to record low

Bloomberg

Nigerian local-currency bond yields have plunged to 18-month lows as investors pile into the debt after the central bank restricted sales of higher-yielding, shorter-term central-bank securities.
The average yield for naira government bonds has dropped 117 basis points to 13.03% since the central bank moved to block individuals and non-bank firms from buying so-called open-market operations (OMOs) on October 23, according to Bloomberg indexes.
Nigerian investors don’t have access to a wide range of assets, “so after the central bank’s restriction on the purchase of OMOs, they resorted to bonds,” Kunle Ezun, a currency and fixed-income analyst at Ecobank Transnational Inc in Lagos, said by phone. “The yield will continue to moderate downward, and over time the borrowing cost to government will be lower.”
The yield could fall as low as 12% in coming weeks, according to Omotola Abimbola, an analyst with Lagos-based Chapel Hill Denham Securities Ltd.
OMOs, which typically have maturities of less than a year, were originally used by the central bank to control liquidity and mainly bought by local lenders.
But the market had been opened to other investors in the past two years to bring in the hard currency needed to keep the naira from depreciating, and OMOs became one of the main instrument used by foreign carry traders.
The OMO restriction is intended to discourage banks from giving loans to customers who will use them to buy high-yielding government securities, according to the central bank.