Nigerian Bonds Yield Climbs after First Auction
The Nigerian bonds yield climbed as traders created short positions by selling down their naira assets after the first auction in 2025. The local bond market opened quietly as attention shifted to the Debt Management Office’s first auction in the year, where N450 billion was offered across April 2029, February 2031, and a new January 2035 bond.
The oversubscribed bond auction attracted higher rates amidst changing market dynamics spooked by an inflation surge. There is expectation that the monetary authority will hike Nigeria’s policy rate in February meeting.
The bond market continues to experience sell pressure; daily transactions remained thin as the market continues to monitor rate direction. In its note, AIICO Capital Limited told investors that there was sell pressure on recently auctioned bonds as participants capitalised on gains, though matching bids were limited.
But traders added that trading activities remained subdued, with sporadic interest in February 2031 and January 2035 papers. Towards the weekend, activity slowed further as focus shifted to the OMO auction, leaving few trades at the curve’s belly.
Local investors offered their short- and long-dated securities. Notably, a modest sell-off in Feb-31 and Mar-50 maturities. In January, the bears retained their grip on the FGN bond space as the average benchmark yield soared by 92 bps, TrustBanc Financial Group Limited said.
Across the benchmark curve, the average yield declined at the short (-48 bps) and mid (-7 bps) segments. The yield contraction was driven by demand for the MAR-2025 (-148bps) and APR-2032 (-16bps) bonds, respectively.
Traders, however, stated that yield expanded at the long (+1 bp) end, specifically as investors sold off the JAN-2042 (+16 bps) bond. DMO offered N450.00 billion at the monthly bond auction to investors through re-openings of the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031 bonds, while opening the JAN-2035 bond.
Total subscription came at N669.94 billion, significantly higher than N278.82 billion subscription level seen at the previous auction. Eventually, the DMO allotted instruments worth N606.46 billion across the three tenors, resulting in a bid-to-cover ratio of 1.1x.
“We anticipate continued post-auction activity on the auction bonds, particularly the newly issued JAN-2035 bond, given its relatively attractive rate.
“Also, we reiterate our forecast for a moderation in yields in the medium term driven by the anticipated monetary policy administration and slower borrowing pace by the Federal Government,” Cordros Capital Limited said. #Nigerian Bonds Yield Climbs after First Auction
