Benchmark Yield Eased on Rising Investors’ Interest in FGN Bonds
Reflecting positive sentiment, investors increased bets on the Federal Government of Nigeria (FGN) bonds in the secondary market amidst tight supply by the Debt Management Office (DMO).
The demand surge for the local bonds in the secondary market was driven by asset managers and other participants with huge assets under management. This caused the yield on the naira assets to fall below 19%, thus reducing government borrowing costs ahead of DMO supply for the month.
Fixed income market analysts reported that trading activities in the bonds market were mixed last week, but there were bullish actions at the mid and long end of the curve amidst expectations that disinflation will persist. According to data from investment banking firms, the average yield dipped by a basis point to close at 18.85% on Friday close.
Fixed income market analysts said trading was concentrated on mid-dated papers such as the Feb 2031s and May 2033s, which saw intermittent interest, with May 2033s changing hands within the 19.50%–19.55% yield band.
The 2031 and 2033 papers continued to observe sustained demand, mainly driven by the local players, CardinalStone Securities Limited said in its market report. As the week progressed, market sentiment turned slightly bearish amid improved offers, though actual trade volumes remained thin, according to AIICO Capital Limited.
Analysts noted that towards the last trading session, activity further tapered as investors’ attention shifted to the post-Treasury bills auction landscape, resulting in a subdued session with minimal executions. Across the benchmark curve, the average yield increased at the short (+4 bps) end. The yield surge was driven by selloffs of the JAN-2026 (+14 bps) bond, according to Cordros Capital Limited.
Meanwhile, yield decreased at the mid (-9 bps) and long (-6 bps) segments following demand for the APR-2032 (-32 bps) and MAR-2036 (-29 bps) bonds, respectively. Over the medium term, analysts at Cordros Capital Limited highlighted expectation of a moderation in bond yields, influenced by the anticipated dovish monetary policy stance and demand and supply dynamics
In May 2025, DMO maintained its active stance in the sovereign bond market this month, reopening the Federal Government of Nigeria (FGN) APR 2029 and FEB 2031 bonds. In total, N300.0 billion was offered—modestly lower than the N350.0 billion offered in April—as the DMO continues to calibrate issuance volumes in response to market dynamics and fiscal requirements.
In a note, analysts at Cowry Asset Limited said investor appetite remained robust, with the overall bid-to-offer ratio improving to 1.5x in May from 1.4x in the prior month.
Market interest continued to favour duration, as the FEB 2031 bond attracted significantly stronger demand with a bid-to-offer ratio of 2.1x, reinforcing a consistent trend in recent auctions where investors appear more comfortable locking in high yields over the long term.
By the close of the auction, the DMO allotted N296.0 billion in the FEB 2031 paper and a modest N4.7 billion in the APR 2029, suggesting selective issuance based on pricing efficiency.
Clearing marginal rates for the two instruments eased slightly compared to April, settling at 19.8% and 18.98%, respectively—down from 19.99% and 19.0%. This softening in rates suggests improved market confidence and a modest repricing of sovereign credit risk, even amid a tight monetary backdrop. Diri Signs 2025 Budget Into Law
