Bonds Rally as Investors Capitalise on Real Return Ahead of Auction
The Nigerian bonds market traded on a bullish note ahead of the Debt Management Office’s (DMO) monthly auction scheduled for Monday. Investors increased their positions on local borrowing instruments, capitalising on real returns on naira assets following a sharp inflation drop and steady benchmark interest rate.
Hence, trading activities were largely positive, supported by demand for the FEB-31 (-136bps), JUL-30 (-110bps), JAN-35 (-92bps), and MAR-35 (-75bps) papers. Investors parked funds into 2035 FGN bonds following the release of the February bond auction circular, which confirmed that the 10-year bonds would not be reissued.
Traders had reported that muted trading activities occurred earlier last week, with thin transactions focused on mid-tenor papers like the February 2031 and January 2035 maturities. However, bullish sentiment emerged following the release of rebased inflation figures, prompting strong demand for high-yielding securities, AIICO Capital Limited said in a note.
Investors targeted on-the-run papers, including the April 2029, February 2031, and January 2035 bonds, alongside mid-tenor options like the May 2033 and June 2038 maturities.
On Friday, the bond market saw a significant rally following the FGN bond offer circular, which removed the January 2035s from the upcoming auction, reducing the monthly offer to N350 billion from N450 billion initial plan. As a result, huge demand was notable on the Jan 2035s.
DMO plans to offer ₦350 billion, split between the April 2029 (₦200 billion) and February 2031 (₦150 billion) papers. Sharp decline in headline inflation prompted a wave of buying interest, particularly at the short and mid segments of the yield curve.
The optimism gained further traction when the MPC decided to hold all policy parameters steady, with the 2029, 2033, and 2035 maturities emerging as the most actively traded instruments.
Investors sought to capitalise on positive real returns, driving buying interest in the 2035s, 2027s, 2039s, and JUL-30 bonds. As a result, the average yield declined by 78 basis points to settle at 19.47%. #Bonds Rally as Investors Capitalise on Real Return Ahead of Auction SEC to Roll out Guidelines for Fintech in 2025 – Agama
