Analysts Forecast Grow In Bond Market Trading

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Analysts have said the Nigerian bond market trading activities is set to grow and more patronage is expected, especially in the next few months.

For this, they would stem from plans by the United States financial institution, JP Morgan, to add Nigerian domestic bonds to its Government Bond Emerging Market Index.

Therefore, the institution has disclosed plans how Nigeria market is to be included in the JP Morgan Emerging Markets Government Bond Index, in a phased manner, by the fourth quarter of 2012.

It was further revealed that this expected to lead to an increase in portfolio flows of up to $1bn or N160bn into FGN Bonds and a positive impact on the Naira.

“The JPMorgan GBI-EM indices offer investors exposure to emerging market debt and tracks local currency bonds issued by emerging market governments”, source said.

Furthermore, the inclusion would be phased over three months. “The GBI-EM Index series may include government debt maturing in 2014, 2019 and 2022 as they are the country’s most liquid bonds,” the statement released last week had noted.

Bond market expects have said that the move would boost Nigeria’s bond market within the next few months, as more foreign investors may likely be attract into the market.

Vetiva Capital Markets’ analyst, in their own report, noted that the move was to attract further investments into the bond market, thus deepening the market as well as attracting more income to the sector.

The JPMorgan Chase & Company is set to add Nigeria to its Government Bond – Emerging Index in three phases, beginning in October up until December; this means that Nigeria will possess a weight of roughly 0.59 per cent in the Index, which has about $170bn of assets under management.

The inclusion of these bond instruments will raise the profile of the Nigerian Bond Market on the international scene and attract steady portfolio inflows from investors and asset managers.

The general view is that is a plus for the country which has been seeking inclusion into emerging-market indexes to increase portfolio flows into the nation’s capital markets.

Some market watcher has added their voice that an emerging markets strategist that Nigerian bonds will have a weight of around 0.59 per cent in the GBI-EM index. This is not much in proportional terms, but may imply that at least $1bn will come into FGN bonds.”

Bond market OTC especially FGN Bond market’s market capitalisation stood at N3.7tn ($23.99bn), according to NSE traded data with liquidity being fed by a relatively developed banking system and a nascent and fast growing pension fund industry


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