The yield on Federal Government of Nigeria (FGN) bonds dropped to 18.4% last week, declining by 19 basis points, as investors responded to limited bond supply and strong demand in the secondary market.
Trading opened on a quiet note following the primary bond auction, with light activity on key maturities such as 2029, 2031, 2033, and 2053 bonds. However, momentum picked up midweek after auction results showed overwhelming demand, pushing stop rates for the 2029 and newly introduced 2032 bonds down to 17.90% and 17.95% respectively.
Investor focus shifted to the June 2032 and February 2031 bonds, which witnessed improved bid offers. The May 2033 bond also attracted strong interest throughout the week, according to AIICO Capital Limited.
Market dynamics shifted slightly by the end of the week, with sentiment turning neutral to slightly bearish. Nonetheless, strategic bargain hunting persisted, supported by enhanced liquidity from coupon payments and the Debt Management Office’s (DMO) rejection of surplus bids in the primary market.
Cordros Capital reported yield compression across the yield curve, with short-term yields falling by 18 basis points, mid-term yields by 2 basis points, and long-term yields by 13 basis points. Key drivers included demand for MAR-2027 (-37bps), FEB-2031 (-33bps), and JUN-2038 (-90bps) instruments.
At the recent auction, the DMO offered N100 billion worth of bonds through a reopening of the 19.30% APR 2029 and issuance of the new 17.95% JUN 2032. Demand far exceeded expectations, with subscriptions reaching N602.86 billion versus N436.40 billion previously, yielding a remarkable bid-to-offer ratio of 6.0x.
With a relatively thin issuance calendar for June, investors are expected to remain cautious as they await the third quarter 2025 bond calendar from the DMO. The scarcity of available bonds is likely to sustain demand in the secondary market, keeping yields under pressure in the near term.
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