Nigerian bond yields increased by 5 basis points (bps) in the secondary market last week as investors adjusted their portfolios in preparation for the final primary market auction of the year by the Debt Management Office (DMO), which will feature the reopening of 5-year and 7-year local bonds.
The DMO’s auction is set for Monday and is anticipated to draw a sizable amount of interest. In anticipation of higher government borrowing through the debt market in 2025, investors are preparing for possible supply reductions. Narrow spot rate variations in main auctions this year have held bond prices in check despite interest rate changes. In general, Nigerian bond yields have not kept pace with those of Treasury and OMO bills.
The Nigerian bond market continues to seek opportunities for yield repricing, driven by high inflation and elevated interest rates. This reflects an ongoing alignment with broader market dynamics. Last week, trading activity was concentrated in the mid-segment of the yield curve, which rose by 15 bps, according to fixed income analysts.
Notably, yields on the June 2033 and February 2034 bonds spiked by 30 bps and 48 bps, settling at 20.23% and 21.36%, respectively. Trading remained subdued overall, with limited activity focused on mid- and long-term instruments, including the February 2031 and June 2053 bonds.
AIICO Capital Limited reported muted interest mid-week across select maturities such as February 2031, May 2033, and February 2034. For December, the DMO plans to reopen the April 2029 and February 2031 bonds, offering ₦60 billion each to local investors in its primary market auction.
Amid tight liquidity in the financial system and portfolio rebalancing efforts, the February 2031 bonds saw increased sell-offs. Analysts predict a quiet start to the new week, with attention shifting to the DMO’s FGN bonds auction, where ₦60 billion will be offered for each maturity.
Cordros Capital Limited noted that average yields expanded across the short (+2 bps), mid (+8 bps), and long (+4 bps) segments of the curve. This was driven by selling pressure on the January 2026 (+13 bps), June 2033 (+31 bps), and April 2037 (+37 bps) bonds. Similar trends were observed with the February 2034 (+48 bps) and April 2037 (+37 bps) maturities.
The average yield on FGN bonds ended the week at 19.53%, up 5 basis points overall.
