Bullish Momentum Persists in Nigerian Bond Market as Yields Drop to 18.38%

Nigeria’s bond market extended its bullish streak last week as investors continued to show strong demand for government debt securities. The surge in appetite pushed average bond yields down by 19 basis points to 18.38%, compared to 18.57% the previous week. The rally was particularly strong in longer-dated instruments, with analysts pointing to improved market liquidity and stabilizing inflation expectations as key drivers.

Among the top-performing instruments were the JAN-35, MAR-27, and APR-32 bonds, which saw significant yield compressions of 64, 39, and 36 basis points, respectively. Despite the broad rally, some bonds experienced selling pressure, notably the APR-32 and JUN-33, where yields rose by 36 and 13 basis points. Market analysts interpreted this as a sign of selective positioning by institutional investors anticipating upcoming policy signals.

In the primary market, the Debt Management Office (DMO) auctioned N100 billion worth of FGN bonds in June, a considerable reduction from the N300 billion offered in previous months. Nonetheless, investor enthusiasm remained high with total subscriptions hitting N602.86 billion, although only N99.99 billion was eventually allotted. The seven-year bond received the lion’s share of interest, accounting for over 93% of total bids.

The secondary market for Treasury Bills also saw bullish sentiment, as average yields dropped by 29 basis points to 20.23%. Short-dated papers like APR-26, MAY-26, and JAN-26 saw notable yield drops due to increased investor demand. However, there was mild profit-taking in select instruments, such as NOV-25 and MAR-26, which saw slight upticks in yields.

Positive sentiment spilled into the Eurobond segment, where average yields declined to 8.61% from 8.97% a week earlier. The most significant yield compressions occurred in the SEP-33, FEB-32, and SEP-28 Eurobonds. The rally reflects growing interest from global investors in emerging market assets, driven by easing risk aversion and the search for higher returns.

Source: Punch