Nigeria’s plain vanilla bonds traded softly prior to the monthly DMO auction, with limited activity and sell-offs prevalent in mid-term maturities. The auction will offer N300 billion in bonds, the last for Q1 2025, amidst a rising yield trend.
The market for Nigeria’s plain vanilla bonds demonstrated soft trading on the secondary market in anticipation of the monthly auction facilitated by the Debt Management Office (DMO) next week. Limited trading activity was noted, with particular interest in mid-duration bonds. Offers were made for bonds maturing in April 2029, February 2031, and May 2033; however, only a few transactions were completed due to significantly wide bid-ask spreads, as reported by AIICO Capital Limited.
Selloffs were evidenced particularly in the mid-segment of the yield curve, with notable increases of 29 basis points for the June 2033 bonds and 35 basis points for the February 2034 bonds. Investors in the fixed income market exhibited cautious behavior, influenced by prevailing bearish sentiment, as they navigated liquidity constraints, prompting them to liquidate positions across the yield curve.
The short and mid-term maturities faced the most substantial sell-offs, especially for bonds maturing in April 2029, which saw yields rise by 10 basis points, and April 2037, which rose by 7 basis points. Conversely, the long-term June 2053 bonds concluded with an offered yield of 17.00%. Overall, the average yield slightly increased by 1 basis point to reach 18.61%.
On Monday, Nigeria’s debt office will conduct an auction offering N300 billion in Federal Government of Nigeria (FGN) bonds for subscription in the primary market. This auction represents the final bond sale for the first quarter of 2025 and aims to aid in addressing the budget deficit through local borrowing efforts.
In conclusion, Nigeria’s plain vanilla bonds experienced subdued trading activity ahead of an upcoming auction, characterized by cautious investor sentiment and notable sell-offs particularly in short and mid-term maturities. The Debt Management Office’s forthcoming auction underscores the government’s strategy to manage the budget deficit through local borrowings. The overall yield figure reflects the current market conditions and investor behavior leading into this auction.
Original Source: dmarketforces.com
