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The average yield on Nigerian government bonds continued its downward trend in the secondary market as investors increased their holdings of naira-denominated assets, buoyed by significant economic growth reported for Q2-2024.
Positive sentiment was evident across short, mid, and long-term maturities, driven by disinflation and robust economic growth, which provided encouraging signals to bondholders.
In a strategic move, the Debt Management Office (DMO) has reduced its monthly bond supply from N300 billion to N190 billion in primary market auctions. However, in a surprising twist, the DMO sold more bonds than initially offered during its August auction, according to the auction results.
Amid changing market dynamics, investors are adjusting their portfolio strategies to favor bonds with longer maturities, anticipating tighter supply in the near future.
The bond market remained resilient, despite the concurrent domestic offering of U.S. dollar-denominated bonds with a 5-year maturity, priced at 9.75%. Analysts suggest that banks, institutional investors, and high-net-worth individuals have the financial capacity to bid for these bonds, especially given the weak exchange rate environment.
Yield contractions were observed at both the short (-3 basis points) and mid (-16 basis points) segments of the curve, resulting in a 7 basis point decline in the average yield to 19.55%, according to CardinalStone Partners Limited.
Notable buying interest was seen in the FEB-2031 bond, causing its yield to drop by 57 basis points. Similarly, the MAY-2033 Federal Government of Nigeria (FGN) bond experienced a yield decline of 54 basis points, while demand for the JUL-2030 bond pushed its yield down by 39 basis points.
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