Due to sell pressure, the average yield on Nigerian government bonds increased modestly to 19.10% in the secondary market on Friday, according to dealers’ separate notes.
Traders said that trading activity in the secondary market was largely modest last week, with the exception of a negative closing on Friday, resulting in a two basis point increase in the average yield to 19.10%.
Bond supply from the Debt Management Office (DMO) has slowed, with the current auction calendar indicating that the authority will provide N200 billion to investment-hungry investors at the October auction.
According to AIICO Capital Limited, the majority of trading activity last year was concentrated on bonds with maturities of April 2029, February 2031, May 2033, March 2050, and June 2053.
In its market update, Afrinvest Capital Limited said across the curve, short and mid-tenor instruments faced sell pressure as investors positioning ahead of the upcoming primary market auction.
The average yield increased at the mid-segment (+7bps) of the curve following selloffs of the FEB-2031 (+20bps) bond, Cordros Capital Limited said in a note. The yield remained unchanged at the short and long segments due to thin trading activities.
Notably, moderate interest was observed on the MAR-2025 bond (-14bps) but was limited to retail sizes, causing the average yield to hold steady at the short end of the curve, Cordros Capital told investors in a note.
“We attribute this to the weak naira liquidity, as evidenced by the banks excessive activities at the Central Bank of Nigeria (CBN) Standing Lending Facility (SLF) window totaling N4.40 trillion.
Analysts at Cordros Capital Limited, expect pockets of demand in the new week as the recently published Q4-24 bond calendar indicates that the DMO intends only to offer instruments worth c. NGN200.00 billion.
The debt office will raise N200 billion for Government through re-openings of the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031 bonds, while the FGN MAY 2033 bond is now off-the-run.
“We maintain our medium-term expectation of elevated yields consequent on anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics,” Cordros Capital Limited said.
