Ahead of Monday’s primary market auction introducing fresh securities, yields on Nigerian government bonds edged higher by eight basis points, signaling investor cautiousness. Trading activity in the secondary market showed fluctuations, while authorities successfully raised approximately N1.2 trillion through Open Market Operations (OMO) and Treasury bill sales.
Market participants concluded the week on a subdued bearish tone, reflecting apprehension over the unexpectedly high stop rates seen in the recent Nigerian Treasury bills auction. Analysts specializing in fixed income noted that sentiment was mildly negative during most trading sessions.
Most transactions centered around mid-duration bonds maturing between 2029 and 2033. However, overall turnover remained modest, according to investment firm AIICO Capital Limited. Early-week trading displayed mixed movements, with some pressure observed on the short and mid ends of the yield curve. Later in the week, selling interest intensified on benchmark papers such as those due in 2031, 2032, and 2033, exerting upward pressure on yields.
There was sporadic demand for longer-dated issues like May 2033 and February 2034 bonds, but volumes were limited. Investors were also cautious due to the recent release of the August 2025 FGN Bond Offer Circular, presenting an offer size of N200 billion.
Consequently, the average bond yield increased by 8 basis points to reach 16.7%. Yield increments were observed across the yield curve: short tenors rose by 2 basis points, mid-curve climbed 11 basis points, and long-term bonds saw a 5 basis point increase. Significant sell-offs in APR-2029 (+42 bps), FEB-2031 (+24 bps), and JUN-2038 (+38 bps) were noted, contributing to the upward trajectory.
Looking ahead, analysts at Cordros Capital Limited project a gradual easing of yields moderated by anticipated dovish stances in monetary policy and evolving supply-demand fundamentals. The Debt Management Office (DMO) is set to reopen bond issues worth between N80 billion and N100 billion and debuted a new borrowing instrument at similar offer sizes. Upcoming sales include a new August 2030 issue and a reopening of the June 2032 bond, each with a target of N100 billion. Experts believe that upward adjustments in yields may be constrained by ongoing disinflation trends.
The DMO remains committed to lowering borrowing costs by reducing spot rates on government bonds, aiming to optimize debt servicing expenses. Market participants are expected to maintain a cautious approach as liquidity conditions are evaluated ahead of the forthcoming FGN bond auction.
