Nigeria’s Plain Vanilla Bonds Experience Soft Trading Ahead of Upcoming Auction
Nigeria’s plain vanilla bonds are trading softly ahead of a DMO auction, with limited secondary market activity and heightened caution among investors due to liquidity constraints. Sell-offs are noted in several maturities, with average yields inching upward. The DMO plans to offer N300 billion in bonds for subscription as part of local borrowing efforts to address budget deficits.
Nigeria’s plain vanilla bonds have experienced soft trading in the secondary market as the Debt Management Office (DMO) prepares for its upcoming monthly auction next week. The bond market showed limited activity, with some investor interest noted particularly in mid-tenor bonds. Offers were observed for April 2029, February 2031, and May 2033 maturities; however, trading was minimal due to substantial bid-ask spreads, as reported by AIICO Capital Limited.
Sell-offs were evident in the mid-segment of the curve, specifically with JUN-33 increasing by 29 basis points and FEB-34 by 35 basis points. Investors in the fixed income market are exercising caution, influenced by a prevailing bearish sentiment alongside liquidity constraints. As a result, market participants have been decently offloading positions across the yield curve.
The short and mid-term maturities, particularly April 2029 and April 2037, saw more significant sell-offs, with yields increasing by 10 and 7 basis points respectively. Meanwhile, long-term bonds, such as June 2053, closed at an offered yield of 17.00%. Overall, the average yield inched upwards by 1 basis point, landing at 18.61%.
On the following Monday, Nigeria’s debt office will auction N300 billion worth of Federal Government of Nigeria (FGN) bonds. This auction marks the last sales for the first quarter of 2025 and is part of ongoing efforts to address budget deficits through local borrowings.
In summary, Nigeria’s plain vanilla bonds are trading softly ahead of the DMO’s monthly auction, characterized by limited market activity and cautious investor sentiment. The sell-off in specific bond maturities reflects market participants’ response to liquidity issues and wider bid-ask spreads. Upcoming auctions aim to mitigate budget deficits, highlighting the ongoing dynamics within Nigeria’s fixed income market.
Original Source: dmarketforces.com
