Nigeria Bonds Yield Falls to 18.5% as Investors Take Positions
The average yield on Nigerian government bonds fell in the secondary market as investors continued to lock in profit on the back of new market dynamics.
The inflation rate fell sharply in January, but the monetary policy authority adopted a wait-and-see approach with a pause on a hawkish stance and kept the benchmark interest rate unchanged.
The decision brought in new market dynamics—a positive real return—that have not been experienced in Nigeria’s financial markets for a long period. Due to some buying activities, the average yield declined to 18.53%, according to separate investment banking firms.
Traders at CardinalStone Limited told investors that the majority of buying activity was observed at the long end (-32bps) of the curve, particularly on the JAN-42 (-69bps), JUN-38 (-53bps), and JUL-45 (-47bps) papers.
Trading activities heated up after opening the week on a quiet note as investors focused on the FGN bond auction. Debt Management Office (DMO) opened a ₦350 billion bond auction to investors across the April 2029 and February 2031 papers.
The auction results showed that the DMO allotted about ₦910.39 billion, with the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031 papers allotted at marginal rates of 19.20% and 19.33%, respectively.
Total subscription reached ₦1.63 trillion, surpassing the offered amount of ₦350 billion by 366%. This figure more than doubled the N669.9 billion subscription recorded at the January auction, underscoring increased investor interest in fixed income securities.
Notably, the longest-tenured bond, the February 2031 issue, garnered the most attention, attracting a substantial N1.2 trillion in subscriptions, which accounted for approximately 72% of total bids. This significant interest led to a final sale of N605 billion for this maturity.
Unmet bids at the DMO’s monthly fueled heightened activity in the secondary market, particularly in mid-tenor bonds, driving yields lower. Yields fell though trading volumes remained subdued due to wide bid/ask spreads, TrustBanc Financial Group Limited told investors in a note.
Buying interest was particularly evident at the short- and mid-segment of the yield curve, signaling a potential flattening trend, Cowry Asset Limited said in a note.
As a result, the secondary FGN bonds market closed the week in positive territory, with strong demand seen in specific maturities such as MAR-25, JAN-26, and MAY-33, collectively driving the average secondary market yield downward by 94 basis points to settle at 18.53%. Yield on Nigerian Treasury Bills Falls ahead of Rebase Data
