Nigerian Bonds Rally Ahead of Debt Office Reopen Offers
Nigerian bonds rallied in the secondary market as investors took positions ahead of the Debt Management Office (DMO) reopening 5- and 7-year papers on Monday.
The DMO is set to conducted primary market auction today with N460 billion worth of local borrowing papers in offer across 5 and year reopened bonds.
The market anticipates rates repricing on bonds in anticipation of the benchmark interest rate by the monetary policy committee of the Central Bank this week.
Last week, the benchmark yield on Nigerian government bonds reduce by 9 basis points to 15.5% in post disinflation trading activities where investors continue to lock in yield ahead of auction.
The market recorded significant interest in naira assets, reflecting surplus liquidity level in the financial system. This put bonds market in bullish footing as strong investor demand filtered across most segments of the yield curve.
Trading activity was vibrant, with volumes reflecting improved sentiment and renewed conviction in fixed-income assets at a time when uncertainty persisted across other investment classes, according to Cowry Asset Limited.
The investment firm reported that much of the liquidity gravitated toward the belly of the curve, where the 2029, 2031, and 2032 maturities continued to dominate flows and offered the deepest pockets of tradable interest.
Fixed income market analysts noted that despite a subdued trading activities on Friday, selective trades still emerged on the 2032 and 2033 papers, sustaining market engagement into the weekend.
“The tone of the market strengthened significantly at the start of the week after October inflation slowed further to 16.05%, down from 18.02% previously.
“The data provided fresh support for duration and accelerated demand for benchmark papers, pushing yields toward the mid-15% area.
“As the week progressed, however, the initial momentum softened slightly as selective sell pressure surfaced, particularly on the 2032 and 2033 papers, while modest two-way flows appeared on the longer-dated 2053 instrument.
“Nevertheless, the broader appetite for government securities persisted, applying mild but consistent downward pressure on yields and trimming the average by 9 basis points to 15.48%.
“This movement reflected the market’s growing confidence in sovereign debt, buoyed by a favourable macro backdrop and improving inflation expectations”, Cowry Asset Limited told investors in a note.
The market awaits the second issuance under the Q4 calendar, where the DMO is set to offer N460 billion, a notable increase from the N260 billion auctioned in October.
The DMO plans to reopen the 2030 and 2032 bonds with N230 billion each, and this expanded issuance is expected to attract substantial demand from investors eager to lock in yields amid a still-easing inflation environment.
With the disinflationary trajectory reinforced by the latest CPI data, secondary market sentiment is likely to remain mildly bullish in the near term. Yields may continue to drift downward gradually, particularly at the mid-curve where liquidity remains strongest and investor positioning is most active
