Nigeria’s plain vanilla bonds traded softly ahead of the DMO auction next week, with limited activity and bearish sentiment noted across the yield curve. Selloffs were particularly pronounced in mid-term maturities. An upcoming bond offering aims to address budget deficits through local borrowings.
Nigerian plain vanilla bonds experienced a soft trading session in the secondary market, ahead of the upcoming monthly auction by the Debt Management Office (DMO). Trading activity was limited, with a noted interest in mid-tenor bonds. Offers were available for bonds maturing in April 2029, February 2031, and May 2033, but only a few trades occurred due to significant bid-ask spreads as reported by AIICO Capital Limited.
The market saw selloffs particularly affecting the mid-segment of the yield curve, with notable increases in yields such as JUN-33 rising by 29 basis points (bps) and FEB-34 by 35 bps. Investors were cautious amidst a bearish market sentiment and ongoing liquidity constraints, prompting them to liquidate positions across the yield curve.
The sell-off primarily impacted short and mid-term maturities, with bonds such as Apr-29 increasing by 10 bps and Apr-37 by 7 bps in response. Meanwhile, the longer-term bond, Jun-53, closed with an offered yield of 17.00%. Across the market, average yields slightly rose by 1 bp, settling at 18.61%.
On Monday, the DMO plans to offer N300 billion worth of Federal Government of Nigeria (FGN) bonds for subscription in the primary market. This will mark the final auction sales for the first quarter of 2025, aimed at addressing the budget deficit through local borrowings.
In summary, Nigeria’s plain vanilla bonds faced reduced activity and bearish sentiment in the secondary market ahead of the DMO’s auction. Selling pressure was evident, especially in the mid-range maturities and amidst liquidity challenges. With upcoming bond offerings intended to support budgetary requirements, market participants remain cautiously optimistic despite recent selloffs.
Original Source: dmarketforces.com
