Nigeria’s Plain Vanilla Bonds Experience Soft Trading Ahead of Auction

Nigeria’s plain vanilla bonds are trading softly ahead of an upcoming monthly auction by the Debt Management Office. Limited activity and sell-offs at the mid segment of the yield curve characterize the current market, reflecting cautious investor sentiment. The auction plans to offer N300 billion worth of bonds to support local borrowing for budget deficits.

Nigeria’s plain vanilla bonds exhibited subdued trading activity in the secondary market as anticipation builds for the Debt Management Office’s upcoming monthly auction. Activity remained limited, particularly in the mid-tenor segment, where offers were observed on bonds maturing in April 2029, February 2031, and May 2033; however, execution of trades was hampered by wide bid-ask spreads, as reported by AIICO Capital Limited.

A noticeable sell-off occurred at the mid-section of the yield curve, resulting in observable increases of 6 basis points in Jun-33 bonds (+29bps) and Feb-34 bonds (+35bps). Investors in the fixed income market exhibited caution due to prevailing bearish sentiments, leading to a strategic offloading of positions across the yield curve, particularly within short and mid-term maturities such as Apr-29 (+10bps) and Apr-37 (+7bps).

At the long end of the curve, Jun-53 bonds concluded with an offered yield of 17.00%. Overall, the average yield displayed a minor increase, rising by 1 basis point to settle at 18.61%. On Monday, Nigeria’s debt office will auction N300 billion worth of Federal Government of Nigeria bonds, marking the final auction for the first quarter of 2025, aimed at mitigating budget deficits through local borrowing efforts.

In summary, Nigeria’s plain vanilla bonds are trading softly in anticipation of an upcoming auction, with limited activity noted among mid-tenor maturities. Sell-offs were predominantly seen at the mid-section of the yield curve, prompting cautious behavior among fixed income investors. The auction scheduled by the debt office aims to address budgetary needs and is pivotal in shaping market dynamics for the remainder of the year.

Original Source: dmarketforces.com