Bonds Yield Falls by 24bps, Market Reacts to Spot Rates Cut
The Federal Government of Nigeria (FGN) bonds yield fell by 24 basis points (bps) in the secondary market last week as investors reacted to the Debt Office primary market auction result.
The outcome of the main auction triggered robust demand in the secondary market, leading to notable yield contractions, particularly across the mid- to long-tenor segment of the curve.
The bullish momentum carried into midweek as yields adjusted lower, but sentiment turned mixed later in the week, AIICO Capital Limited said in a note.
At the same time, analysts saw short-dated papers coming under pressure, while mid-tenors saw renewed demand and long-dated bonds held largely steady.
Toward the close of the week, trading activity slowed as attention shifted to OMO auction, though mild repricing persisted at the belly of the curve.
Trading activity was particularly robust in short- and medium-term instruments, reflecting improved market sentiment and sustained appetite for fixed-income securities amid lingering uncertainties in other asset classes, Cowry Asset Management Limited told investors in a note.
The investment firm stated that the broad-based demand exerted mild downward pressure on yields, with the average yield falling by 24 basis points to 16.27% for the week.
“We attribute this to investors’ reaction to lower-than-expected stop rates at the September primary market auction,” Cordros Capital Limited said in its investors’ note.
Across the curve, the average yield declined at the short (-31 bps) and mid (37 bps) segments, fixed income market analysts said.
The yield contraction was driven by demand for the JAN-2026 (-51 bps) and JUN-2033 (-65 bps) bonds, respectively, while it closed flat at the long end.
Last week, the Debt Office recorded a stellar outing at the September 2025 FGN Bond Auction, with overall subscription levels soaring 288.31% above the offer size.
Demand was heavily skewed toward the mid-curve, as reflected in bid-to-cover ratios of 2.32x for the 5-year FGN AUG 2030 and an exceptional 10.28x for the 7-year FGN JUN 2032.
At the close, the DMO allotted N576.62 billion across both tenors, splitting N87.80 billion to the 5-year and N488.82 billion to the 7-year notes.
Interestingly, aggressive demand compressed marginal clearing rates to 16.00% (-195 bps) for the 5-year and 16.20% (-175 bps) for the 7-year, underscoring strong investor appetite amid improving market sentiment and stable naira conditions.
The outcome suggests investors are increasingly confident in medium-term sovereign risk, encouraged by the blend of robust system liquidity, easing yield expectations, and macro signals of stability, said Cowry Asset Management in a note.
Fixed income market analysts at Cordros Capital Limited expect demand in the FGN bond secondary market to remain strong, owing to the robust system liquidity and the recent policy rate cut.
“We also reiterate our expectations of a cautious stance at the long end of the curve, amid persistent concerns over fiscal sustainability and heightened duration risk,” the firm said. #Bonds Yield Falls by 24bps, Market Reacts to Spot Rates Cut Foreign Investors Dump Nigeria, Ghana, Angola Eurobonds
