Yields on Nigerian government bonds continue to decline across the midsection of the curve as investors ramp up purchases—particularly targeting the 2031 and 2033 maturities—amid expectations of limited bond supply from the government.
The trend is being driven by sustained demand in the secondary market, where investor appetite remains high despite tight liquidity and minimal supply from the primary market auctions.
While short-term bond yields experienced a slight uptick—expanding by 1 basis point—largely due to profit-taking in the FEB-2028 bond, which rose by 2 basis points, the mid-term segment saw a more notable yield contraction. The average yield in this section dropped by 5 basis points, largely influenced by increased demand for the JUL-2034 bond, which recorded a significant 25 basis point decline in yield.
As a result of these contrasting movements, the overall average yield across the yield curve dropped to 18.82%, indicating bullish sentiment in the debt market.
Market watchers believe the current rally is being fuelled by expectations that bond supply will remain restrained in the short term. The Debt Management Office (DMO) is scheduled to carry out its June primary market auction, which is expected to conclude the federal government’s second-quarter domestic borrowing programme.
The cautious approach to bond issuance reflects broader fiscal strategies to manage local debt levels without exerting additional pressure on interest rates. It also underscores investor confidence in fixed-income instruments, particularly amid uncertainties surrounding inflation, FX volatility, and macroeconomic policy direction.
Analysts note that with limited new issuances expected and robust demand continuing, yields are likely to remain suppressed, especially in the belly of the curve. However, they warn that any unexpected policy shift or deviation from the DMO’s borrowing calendar could trigger market repricing.
As the auction date approaches, all eyes remain on the DMO’s final offering size and maturity distribution, which will influence near-term price movements and investor positioning in the local debt capital market.
