The average yield on Nigerian government bonds climbed slightly to 19.3% in the secondary market due to thin trading activities that had bearish tone.
The Nigerian fixed income market extended its bearish run last week, with increasing risk aversion for long duration bonds, against the backdrop of a disappointing inflation print in Sept, further increase in one-year Treasury bill auction stop rate.
Against this backdrop, the benchmark bond yield curve expanded as analysts noted trading activities were relatively on calm note, albeit with bearish tone.
In the secondary market, bondholders have continued to weighed impacts Nigeria’s hot red inflation condition, higher interest rate environment on portfolio returns.
Despite the low yields on FGN bonds, marginal rates on reopened bonds in the primary market rose. Last week, the Debt Management Office (DMO) held its monthly bond auction, reopening two bonds for investor subscriptions.
The 2029 and 2031 bonds raised ₦180 billion, with subscriptions of ₦389.32 billion and allotments of ₦289.60 billion. According to experts, both papers’ marginal rates jumped by 175 basis points apiece. DMO re-openings for the 19.30% FGN APR 2029 were priced at 20.75%, while the 18.50% FGN FEB 2031 experienced a 1.75% increase in spot rate to 21.74%.
Breakdown showed that total subscription level settled at N389.24 billion, lower than N414.89 billion that investors stake at the previous auction. Eventually, the DMO allotted instruments worth N289.60 billion across the two tenors, resulting in a bid-to-cover ratio of 1.3x.
Post-auction, fixed income securities traders said interest grew in the 2031 and 2033 bonds. Due to the minimal activity in the market on the back of attention shifting auction, the average yield inched higher by 1bp to 19.3%.
In its market update, Cordros Capital Limited told investors that across the benchmark curve, the average yield expanded at the short (+5bps) and long (+4bps) ends.
The yield surge was attributed to investors’ decisions to trim or sell off the JAN-2026 (+10bps) and JUN-2053 (+32bps) bonds, respectively.
