Nigeria’s plain vanilla bonds are trading softly in the secondary market before the DMO’s monthly auction. Limited activity, selloffs in mid-term bonds, and increased average yields characterize the current scenario. The auction on Monday will offer N300 billion in FGN bonds, aiming to support the budget deficit for Q1 2025.
Nigeria’s plain vanilla bonds experienced a soft trading pattern in the secondary market prior to the upcoming monthly auction conducted by the Debt Management Office (DMO). Market activity remained limited, with sporadic interest focused primarily on mid-term bonds. Although offers were present for bonds maturing in April 2029, February 2031, and May 2033, only a few trades occurred due to significant disparities in bid-ask spreads, as noted by AIICO Capital Limited.
Selloffs were particularly evident at the mid curve, with an increase of 6 basis points in segments such as JUN-33, which rose by 29 basis points, and FEB-34, experiencing a rise of 35 basis points. Investors in the fixed income market adopted a cautious approach given the prevailing bearish sentiment and liquidity constraints, prompting individuals to strategically offload positions across the yield curve.
The short and mid-term maturities, especially those maturing in April 2029 and April 2037, were most adversely affected by this sell-off, with increases of 10 basis points and 7 basis points, respectively. At the long end of the curve, Jun-53 concluded with an offered yield of 17.00%. Consequently, the average yield edged higher by 1 basis point to settle at 18.61% overall.
On Monday, Nigeria’s debt office is set to offer N300 billion worth of Federal Government of Nigeria (FGN) bonds for subscription in the primary market, marking the final auction sales for the first quarter of 2025. This initiative is part of the government’s effort to address budget deficits through local borrowings.
In summary, Nigeria’s plain vanilla bonds are trading softly ahead of an imminent auction by the Debt Management Office, reflecting limited market activity and cautious investor sentiment. Notable selloffs along the yield curve, particularly affecting mid-term maturities, have resulted in a slight increase in average yields. The upcoming auction aims to bolster budgetary support through local borrowing, concluding the quarter’s financial activities.
Original Source: dmarketforces.com
