Yields on Federal Government of Nigeria (FGN) bonds declined by 24 basis points (bps) in the secondary market last week as investors responded positively to the results of the Debt Management Office (DMO)’s latest primary market auction.
Following the auction, the market saw robust demand, particularly for medium- to long-term maturities, leading to noticeable contractions in yields across various bond tenors. The bullish sentiment persisted through midweek before moderating toward the weekend, according to AIICO Capital Limited.
Market analysts observed that short-term instruments came under mild pressure, while mid-term bonds experienced increased investor demand. Long-dated bonds, however, traded relatively flat. Trading momentum slowed slightly toward the end of the week as investors turned their focus to the OMO auction, though mild price adjustments continued in the mid-segment of the yield curve.
Cowry Asset Management Limited reported strong trading activity in short- and mid-term bonds, reflecting renewed investor confidence in fixed-income securities amid uncertainties surrounding other asset classes. The average bond yield declined to 16.27% for the week, representing a 24-bps drop.
Cordros Capital Limited attributed the downward movement in yields to the lower-than-expected stop rates recorded at the September bond auction. Analysts noted yield contractions of 31 bps and 37 bps across the short- and mid-tenor segments, respectively, driven primarily by the demand for the January 2026 (-51 bps) and June 2033 (-65 bps) maturities.
The DMO’s September 2025 bond auction saw overwhelming investor participation, with subscription levels surpassing the offer size by 288.31%. Demand was particularly strong for the mid-term bonds, with bid-to-cover ratios reaching 2.32x for the five-year FGN AUG 2030 bond and a staggering 10.28x for the seven-year FGN JUN 2032 bond.
At the close of the auction, the DMO allotted ₦576.62 billion across both maturities—₦87.80 billion to the five-year bond and ₦488.82 billion to the seven-year instrument. The intense buying pressure drove clearing rates lower to 16.00% (-195 bps) for the five-year and 16.20% (-175 bps) for the seven-year tenors.
Analysts said the outcome reflects rising investor confidence in Nigeria’s medium-term debt instruments, fueled by steady liquidity, easing inflation expectations, and a generally stable macroeconomic environment.
Cordros Capital projected that strong demand in the secondary bond market would continue, supported by ample system liquidity and the CBN’s recent interest rate cut. However, it warned that investors may remain cautious toward longer-term instruments amid persistent fiscal concerns and elevated duration risks.
