Bloomberg News

Nigeria’s 3-Year Bond Yield Rises Most in at Least a Year

October 12, 2011

Oct. 12 (Bloomberg) -- Nigerian bonds declined sending yields for three-year notes to the highest in at least a year, spurred by the central bank’s record increase of its benchmark interest rate.

The yield on 5.5 percent debt of Africa’s top oil producer due 2013 surged 81 basis points to 13.56 percent, according to data from the Financial Market Dealers Association. That’s the highest since September 2010, when Bloomberg started compiling the data.

The central bank raised its benchmark rate by 275 basis points to 12 percent on Oct. 10, the most since it was introduced in 2007, to help bolster the naira and curb inflation. Pressure had built up on the currency from declining prices for crude oil, the source of 95 percent of the country’s export earnings, and mounting demand for foreign currency to fund imports.

“Bond yields increased because of investors taking advantage of the rise in benchmark interest rate,” Wale Abe, chief executive officer of the Financial Market Dealers Association, an interbank clearing house for Nigerian banks, said today by phone from Lagos. “We expect more of such investments in short-tenured bonds.”

The 9.45 percent bond due 2013 rose 47 basis points to 12.65 percent, while the 8.50 percent debt due 2029 jumped 100 basis points, rising to 14.68 percent.

The naira rallied for a second day against the dollar, climbing 2 percent to 155.75 per dollar by 1:12 p.m. in Lagos, the commercial capital, taking its gain in the past two days to 5.1 percent, biggest two-day advance since November 2003.

--Editors: Dulue Mbachu, Ana Monteiro.

To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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