Nigerian plain vanilla bonds traded softly ahead of a DMO auction, with limited trading activity and increased yields amid bearish market sentiment. Sell-offs were noted particularly in mid-term maturities. The DMO will auction N300 billion in FGN bonds to support local budget deficits, marking the last auction for Q1 2025.
Nigeria’s plain vanilla bonds experienced a soft trading environment in the secondary market, primarily in anticipation of the upcoming Debt Management Office (DMO) monthly auction scheduled for next week. Market activity remained limited, attracting some interest particularly in the mid-term bonds, although few trades were executed due to significant bid-ask spreads, as reported by AIICO Capital Limited.
Specific offers were identified on bonds maturing in April 2029, February 2031, and May 2033; however, selloffs were noted in the mid-segment of the yield curve. Bonds such as JUN-33 and FEB-34 witnessed increases of 29 and 35 basis points, respectively, highlighting a bearish market sentiment among fixed income investors who opted for cautious trading amid liquidity constraints.
As a result, market participants opted to liquidate their positions across the yield curve, particularly affecting short and mid-term maturities. Bonds maturing in April 2029 and April 2037 saw yield increases of 10 and 7 basis points, respectively, while at the long end of the curve, the June 2053 bond concluded with an offered yield of 17.00%. Concurrently, the average yield observed a slight increase of 1 basis point, settling at 18.61%.
On Monday, Nigeria’s Debt Management Office will offer N300 billion worth of Federal Government of Nigeria (FGN) bonds for subscription in the primary market. This auction represents the final sales for the first quarter of 2025, aimed at supporting budgetary deficits through local borrowing efforts, as the nation navigates economic challenges.
In summary, the Nigeria plain vanilla bonds are experiencing a subdued trading atmosphere prior to the upcoming auction, which is expected to address budget deficits. Market activity is characterized by cautious investor behavior amidst liquidity challenges, leading to notable sell-offs particularly in mid-term bonds. The forthcoming auction will play a critical role in fiscal strategies as Nigeria seeks to bolster its financial standing.
Original Source: dmarketforces.com
