Nigeria’s plain vanilla bonds traded soft in the secondary market prior to an upcoming DMO auction. Limited trading activity occurred, with cautious investor sentiment and notable selloffs in mid-term maturities. The average yield slightly increased, and an auction offering N300 billion in bonds is set for Monday.
Nigeria’s plain vanilla bonds experienced soft trading patterns in the secondary market ahead of the upcoming monthly auction by the Debt Management Office (DMO). The bond market exhibited limited activity, with some trading interest noted in the mid-tenor range. Specific offers were observed for the April 2029, February 2031, and May 2033 bonds; however, trade execution remained minimal due to the wide bid-ask spreads, as reported by AIICO Capital Limited.
The market faced significant selloffs in the mid (+6 basis points) segment of the yield curve, notably affecting JUN-33 (+29 basis points) and FEB-34 (+35 basis points). Investors in the fixed income market proceeded with caution amidst a predominately bearish sentiment. Strained liquidity conditions led market participants to reduce their holdings along various points of the yield curve.
Particularly impacted were the short and mid-term maturities, such as April 2029 (+10 basis points) and April 2037 (+7 basis points). Conversely, at the long end of the curve, the June 2053 bond registered an offered yield of 17.00%. The overall average yield saw a slight increase of 1 basis point, culminating at 18.61%.
On Monday, the DMO will be offering N300 billion worth of Federal Government of Nigeria (FGN) bonds for subscription at the primary market. This auction marks the final sales for the first quarter of 2025, reflecting ongoing efforts to mitigate budget deficits through local borrowing strategies.
In summary, Nigeria’s plain vanilla bonds are experiencing a soft trading environment ahead of the DMO auction, characterized by limited activity and cautious investor sentiment. The majority of selloffs occurred in mid-term maturities, while the average yield slightly increased. The imminent auction will offer an opportunity to address budget deficits through local borrowings, marking a critical financial maneuver for the upcoming quarter.
Original Source: dmarketforces.com
