Investors Ramp Up FGN Bonds, Lock in Yields on Rate Cut Fear
Trading activities on the Federal Government of Nigeria (FGN) bonds in the secondary market ended on a bullish note, buoyed by strong investor sentiment and a growing consensus that the Central Bank may ease monetary policy later this month.
Traders said investor demand continues to increase amidst declining bond supply from Nigeria’s Debt Management Office. Supported by excess liquidity in the financial system, buying activities concentrated on mid- to long-dated maturities last week, pulling down yields on the naira assets.
With inflation showing signs of moderation, investors moved swiftly to lock in yields at current levels before any potential rate cuts begin to compress returns, Cowry Asset Limited said in an investor note. In the secondary market for Nigerian bonds, buying momentum picked up significantly, dragging yield downward at the close of the week trading.
This sustained bullish wave, carried over from the previous week, drove yields lower across the curve. The overall average yield on FGN bonds declined sharply by 84 basis points to close at 17.46%, reflecting the strength of demand for sovereign paper and investors’ forward-looking stance on interest rates.
Early sessions recorded modest interest in the Nigerian bonds, which are expected to mature in April 2029, February 2031, and May 2033, with limited trading on other tenors, according to AIICO Capital Limited.
As the week progressed, sentiment strengthened significantly, with active demand for high-yield papers, particularly the local bonds maturing in February 2034, January 2035, and June 2053. Analysts said the May 2033 bond garnered the most attention, with yields compressing to as low as 17.50% amid strong deal flow. Offers on key papers trended lower in response to firm buying.
By Friday, overall market momentum remained positive, driving the average mid-yield down sharply. Trading is likely to remain cautious, with buying interest sustained ahead of the Q3 FGN Bond issuance calendar release. AIICO Capital Limited said in its investors note
In June, the Debt Management Office offered N100 billion in bonds last month for subscriptions and then slashed the spot rate while the authority allotted to match its exact offer. Total subscriptions came at N602.83 billion, while N100 billion worth of bonds were sold to investors.
Hence, the local bond auction cleared at lower stop rates of 17.75% for the April 2029s and 17.95% for the new June 2032s. This auction result triggered a rally across the curve, with yields dropping 15 to 20 bps.
Analysts reported that selective buying persisted post auction, particularly in the April 2029s, February 2031s, May 2033s, and June 2053s, although wide bid ask spreads limited volumes. Demand remained consistent for the newly issued June 2032s.
The month closed with a modest tone as profit-taking slowed momentum, but the general sentiment stayed positive. As a result, the average mid yield on benchmark FGN bonds declined by 44 bps m/m to 18.24% in June. Investors Ramp Up FGN Bonds, Lock in Yields on Rate Cut Fear GTCO London Listing—Strategic Move to Attract Global Investors Confidence
