The average yield on Nigerian government bonds increased by four basis points (4 bps) to 18.57% at the start of the week, as investors began selling off some of their holdings. This shift was driven by a combination of economic growth, slowing inflation, and persistently high benchmark interest rates, which have made naira-denominated assets more attractive.
Analysts believe that investors are shifting towards the debt capital market due to the potential for inflation-protected returns. According to LSIntelligence Associates, wealthy investors seeking to safeguard their assets are now seeing fixed-interest securities as a safer option compared to the risks associated with stock market investments.
This perspective aligns with recent stock market trends, where investors have been pulling out their money, leading to market downturns. On Monday, trading at the Federal Government of Nigeria (FGN) secondary bond market reflected this trend, with increased sell-offs particularly at the short end of the curve, leading to a 10-basis-point rise in yields.
One notable movement was in the MAR-25 FGN bond, where investors sold off positions, causing its yield to jump by 147 bps, reversing previous gains. AIICO Capital Limited reported that while there were strong offers in the mid-to-long-term bond market, actual bids remained limited.
Fixed income market analysts also noted that trading volumes were low due to a significant gap between buying and selling prices. Most transactions took place in bonds maturing in April 2029, February 2031, May 2033, and June 2038.
According to TrustBanc Financial Group, investors showed a preference for shorter-term bonds, anticipating lower rates in the upcoming Nigerian Treasury Bills auction. As a result, the overall bond market yield climbed by 4 basis points, settling at 18.57%.
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