Nigerian Bonds Yield Rises 5bps Ahead of Final Auction
The Nigerian bonds benchmark yield rose by 5 basis points (bps) in the secondary market last week as investors trimmed holdings ahead of the Debt Office plan to reopen two local bonds at a monthly primary market auction.
The Debt Management Office (DMO) will conduct its final primary market auction on Monday, where the authority will reopen 5-year and 7-year local bonds to investors. A slew of investors expected demand to remain strong due to declining supply ahead of massive borrowing expectations via the debt market in 2025.
Though interest rate has been adjusted, the bond pricing has suffered from tight spot rate movement in the main auctions this year. Yields on bonds have remained subdued in contrast to yields on Treasury and OMO bills.
The market continues to seek opportunity for yield repricing on the back of elevated inflation and interest rates to align with market dynamics. Last week, trades on bonds concentrated at the mid-segment—up by +15 basis points (bps)—of the yield curve, according to fixed income market analysts.
Notably, yields on the Jun-33 and Feb-34 papers jumped 30 bps and 48 bps to settle at 20.23% and 21.36%, respectively. The bond market was subdued throughout the week, with minimal trading activity focused on mid- and long-dated papers like the Feb 2031s and Jun 2053s.
AIICO Capital Limited told investors that sideways interest was observed mid-week across select maturities, including Feb 2031, May 2033, and Feb 2034. For December, the DMO will reopen April 2029 and Feb 2031 bonds, offering ₦60 billion on each to local investors via primary market auction sales.
Due to tight liquidity in the financial system and the desire to rebalance portfolios, investors dumped Feb 2031 bonds. Fixed income market analysts anticipate a calm start in the new week as the focus will shift to the FGN bonds auction, in which ₦60 billion each will be offered for subscription.
In its note, Cordros Capital Limited said the average yield expanded at the short (+2bps), mid (+8bps), and long (+4bps) segments. The yield surge was driven by sell pressures on the JAN-2026 bonds (+13bps), JUN-2033 (+31bps), and APR-2037 (+37 bps) bonds.
There were sell pressures on the Feb-34 bonds (+48 bps) and Apr-37 bonds (+37 bps) maturities. Overall, the average yield on FGN bonds expanded by 5 bps to close at 19.53%. #Nigerian Bonds Yield Rises 5bps Ahead of Final Auction
