Yields on Nigerian government bonds fell in the secondary market as investors increased their appetite for naira-denominated assets, positioning ahead of potential monetary policy easing and amid signs of limited supply.
At Wednesday’s primary market auction, spot rates on Nigerian Treasury bills were cut by an average of 2.5%, aligning with market expectations and further pushing yields lower as investors sought to lock in returns before further rate declines.
Asset managers, pension funds, and cash-rich banks have been channeling funds into government securities, anticipating a softer interest rate environment in the third quarter.
Trading in the bond market was concentrated on mid- to long-term maturities, particularly the May 2033, February 2034, and June 2053 papers, although activity was constrained by wide bid-ask spreads, AIICO Capital noted in a report.
Despite cautious trading, the average yield on benchmark bonds dipped by 15 basis points to 16.40%. Analysts expect the sharp drop in NTB stop rates to drive stronger demand for bonds in the coming days, pushing yields further down in the secondary market.
Throughout June, the FGN bond market maintained a calm and bullish tone, with trading activity picking up mid-month following the FGN bond auction, which cleared at lower stop rates of 17.75% for the April 2029s and 17.95% for the newly issued June 2032s. This triggered a rally across the yield curve, with yields dropping by 15–20 basis points.
Selective buying continued, especially in the April 2029s, February 2031s, May 2033s, and June 2053s, although volumes remained limited due to bid-ask spreads. Demand was notably strong for the June 2032s.
The month closed on a modest note as profit-taking slowed momentum, but overall market sentiment remained positive.
By the end of June, the average mid-yield on benchmark FGN bonds had declined by 44 basis points month-on-month to 18.24%, while yields fell by 39 basis points quarter-on-quarter, reflecting stronger demand for fixed-income assets and easing inflation expectations.
