The average yield on Nigerian government bonds fell further in the secondary market as investors increased their holdings of naira assets following a strong economic growth rate in the second quarter of 2024.
Disinflation and economic growth generated good signals to bondholders, resulting in buying sentiment at the short, belly, and longer maturity levels.
The Debt Management Office (DMO) has strategically decreased bond supply from N300 billion at monthly primary market auctions to N190 billion in lot sizes. According to the results of its main market auction, the debt agency sold more bonds than it offered in August, which was unexpected.
Based on the latest pattern in the debt market, investors are aligning their portfolio structures to include bonds with longer maturities due to the expectation of tight supply.
The bond market rallied despite the ongoing US dollar domestic bond offering with a 5-year maturity priced at 9.75%. Analysts predict that banks and institutional investors, including high-net-worth individuals, will have the financial muscle to bid for the bond due to the weak exchange rate.
Yield contractions were seen at the short (-3 bps) and mid (-16 bps) segments of the curve, resulting in a 7 bps decline in the average yield to 19.55%, according to CardinalStone Partners Limited.
The market saw buying interests in the FEB-2031 bond, causing its yield to slump by 57 bps. Also, the May-2033 FGN bond was in demand, and its yield plunged by 54 basis points, while demand for JUL-2030 instruments dragged its yield lower by -39 basis points.
