Nigeria’s bond market sustained its bullish momentum last week, as investors showed increased appetite for sovereign debt instruments, pushing average yields down by 19 basis points to 18.38 per cent from 18.57 per cent recorded in the previous week.
The bullish sentiment was driven largely by strong demand for specific longer-dated instruments, notably the JAN-35, MAR-27, and APR-32 bonds, which saw yield compressions of 64 bps, 39 bps, and 36 bps, respectively. Analysts attributed the heightened demand to improved market liquidity and a relative slowdown in inflationary expectations.
However, despite the broad rally, some selling pressure was observed on the APR-32 and JUN-33 bonds, leading to yield increases of 36 bps and 13 bps, respectively.
Market watchers say the mixed sentiment reflects selective positioning by institutional investors ahead of upcoming policy cues.
In the primary market, the Debt Management Office offered N100bn worth of FGN bonds in its June auction, significantly lower than the N300bn it had offered in previous months. Despite the reduced offer size, investor subscription reached N602.86bn, though only N99.99bn was allotted.
The seven-year bond was particularly oversubscribed, attracting 93.09 per cent of total bids.
The Central Bank of Nigeria eventually cleared the auction at stop rates of 17.75 per cent for the APR-29 and 17.95 per cent for the JUN-32 maturities, slightly aligning with prevailing secondary market levels.
Meanwhile, the secondary market for Treasury Bills also leaned bullish, with average yields falling by 29 bps week-on-week to 20.23 per cent. Significant yield declines were recorded on the APR-26 (-136 bps), MAY-26 (-97 bps), and JAN-26 (-86 bps) bills, reflecting strong investor demand for short-term government securities. Some mild profit-taking activity, however, pushed yields higher on the NOV-25 (+8bps) and MAR-26 (+5bps) papers.
In the Eurobond segment, sentiment was also positive. Average yields dipped to 8.61 per cent from 8.97 per cent the prior week. Notable yield compressions occurred in the SEP-33 (-45 bps), FEB-32 (-44 bps), and SEP-28 (-39 bps) Eurobonds, as global investors sought higher yields in emerging market assets amid declining risk aversion.
