Nigeria’s Bond Market: Yields Dip as DMO Prepares for N100bn Issuance
Investor Appetite for Nigerian Bonds Strengthens Ahead of DMO's Fresh Offerings
The average yield on Federal Government of Nigeria (FGN) bonds fell to 18.64% in the secondary market ahead of a thin supply by the Debt Management Office (DMO) on Monday.
The DMO is expected to offer N100 billion worth of local bonds across re-opening and fresh issues to investors at the primary market auction (PMA) scheduled for today.
In the secondary market, trading activities ended on a positive note last week, buoyed by improved investor sentiment, a stronger sovereign ratings outlook, and resilient demand across maturities, said Cowry Asset Limited in a note.
Trading activity on the local bonds was initially subdued as market attention turned to the OMO auction floated early last week, drawing limited secondary interest due to wide bid-ask spreads.
Midweek, trading picked up moderately, with demand concentrated in mid-to-long tenor papers such as the new April 2029s, February 2031s, May 2033s, March 2035s, and June 2053s.
The market maintained a quiet but mildly bullish tone towards the final trading session, with selective demand returning after early profit-taking. Notably, most trades were executed on Feb 2031s, May 2033s, Feb 2034s, and Mar 2050s.
Traders said moderate bullish sentiment was observed, particularly on select maturities. Yields on the JAN-35, JUN-38, and MAR-26 instruments fell by 57 basis points, 57 basis points, and 60 basis points, respectively, reflecting increased demand.
As a result, the average yield across the FGN Bonds curve declined by 25 basis points week-on-week to 17.83%, marking a notable improvement in domestic bond appetite.
Looking ahead, analysts expect bullish momentum to persist across both local and foreign bond markets, aided by favourable sentiment and strengthening fiscal buffers.
DMO is set to raise N100 billion via bond issuance at its scheduled auction on Monday, offering N50 billion each in a 5-year reopening of the April 2029 bond and a new 7-year June 2032 issuance.
A robust outing is anticipated, as the DMO seeks to tap the local market to meet the federal government’s funding obligations for the fiscal year, Cowry Asset Limited said in a note.
Credit: dmarketforces.com
