Nigerian Bonds Sell Off as Markets Await Q3 Borrowing Plan
Trading in Nigerian government bonds was mostly bearish, with investors trimming positions as the debt market awaits an official release of the third-quarter 2026 borrowing plan.
Investors are awaiting the official release of the Debt Management Office (DMO) borrowing plan for the third quarter, amid reports that the authority has proposed raising N4 trillion through auctions during the period.
The bonds circular has not been officially made available on the DMO website tracked by MarketForces Africa. Investment experts spotted a sharp increase in bond auction size in June, which is anticipated to inform the Q3 borrowing plan ahead of the 2027 election.
The authority had reduced offers from ₦900 billion in January, to ₦800 billion in February, ₦700 billion in April, and ₦600 billion in May.
However, June marked a sharp reversal: the DMO doubled the offer size to ₦1.20 trillion, its largest single bond auction of the year and a clear signal of stepped-up domestic financing needs.
Last week, the yield curve shifted across segments, with heightened sell-offs and weak investor demand across most maturities, pressuring prices relative to the previous week.
A slew of fixed-income market analysts told MarketForces Africa that the broad-based rise in yields reflects continued sell-side pressure as investors demand higher returns on government securities.
Fixed-income market analysts reported subdued trading activity, reflecting cautious investor sentiment and a reduced appetite for local fixed-interest securities.
Some investors are out of the market after locking in yields on longer durations in anticipation of spot rates repricing, an expectation that has begun to materialise in recent auctions.
The market saw signs of aggressive local borrowing via bond supply as the Debt Management Office raised N1.2 trillion in the June auction, the first of its kind since the beginning of 2026.
The June 22, 2026 FGN bond auction recorded strong investor demand, with total subscriptions of ₦1.41 trillion, representing a 1.18x bid-to-cover ratio against the ₦ 1.20 trillion offered. The DMO allotted ₦1.22 trillion, exceeding the offer size by 1.8%, reflecting strong participation.
Both reopened bonds attracted similar interest, with the 22.60% FGN JAN 2035 and 16.2499% FGN APR 2037 issues recording bid-to-cover ratios of 1.18x. Marginal rates remained closely aligned at 18.34% and 18.35%, indicating similar investor yield expectations across both maturities.
With risk-off sentiment in the secondary market last week, the average bond yield rose by 10 basis points week-on-week to close at 17.88%.
Analysts said they expect the domestic bond market to remain cautiously traded as investors monitor liquidity conditions, inflation trends, and upcoming debt issuances, with yields likely to stay elevated in the near term. Naira Destiny Ties to Hot Money Equation – High Interest Rate, Foreign Capital
