August 17, 2020/Coronation Weekly

From mid-March through to the beginning of this month, the Federal Government of Nigeria (FGN) bond market was a one-way bet, with yields tightening and prices moving up steadily. Two weeks ago the market cracked, with a brief sell-off, which was a reminder that prices can go down.

However, it seems that institutional liquidity is set to increase, and more bond-buying may emerge in the weeks and months ahead. This is dangerous, in our view, and stores up trouble for the future. As we argue in Coronation Research: Navigating the Capital Market, 14 July, diversification of asset classes, and of risk in general, is called for.

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