Bond Market Buzz: Yields Dip as Investors Chase Safety in Sovereign Debt

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Olori Uwem

Well-Known Member
Mar 18, 2024
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Bond Market Buzz: Yields Dip as Investors Chase Safety in Sovereign Debt

Market Pulse: Bullish Mood Deepens

Nigeria’s bond market extended its bullish rally last week, fueled by growing investor appetite for longer-tenure government bonds. As a result, average bond yields declined by 19 basis points (bps), settling at 18.38%, compared to 18.57% the previous week.

This downward movement in yields reflects strong buying momentum and rising demand for stable returns in the face of easing inflation expectations and improved system liquidity.

Where the Action Was: Key Bonds in Focus

Investor attention zoomed in on select long-dated bonds, which recorded the biggest yield drops:
• JAN-2035 Bond: Yield dropped by 64bps
• MAR-2027 Bond: Yield dropped by 39bps
• APR-2032 Bond: Yield dropped by 36bps

However, not all bonds joined the party. Some selling pressure was seen on:
• APR-2032: Yield rose by 36bps due to partial selloffs
• JUN-2033: Yield rose by 13bps

This indicates selective positioning by institutional investors awaiting policy signals.

Primary Auction: Oversubscription Despite Lower Supply

In the June bond auction, the Debt Management Office (DMO) offered only ₦100 billion worth of FGN bonds — a sharp drop from the ₦300 billion offered in previous months.

✅ Despite the reduced offer size:
• Subscription hit ₦602.86 billion
• Only ₦99.99 billion was allotted
• The 7-year bond stole the show, absorbing 93.09% of all bids

The stop rates set by the Central Bank of Nigeria (CBN) remained attractive:
• APR-2029: 17.75%
• JUN-2032: 17.95%

Takeaway: High investor confidence persists, even with leaner bond issuance.

Treasury Bills: Yield Decline Accelerates

Short-term investors also rushed into Treasury Bills, causing yields to tumble by 29bps, with average T-Bill yields now at 20.23%.

Most significant yield drops were observed in:
• APR-2026: -136bps
• MAY-2026: -97bps
• JAN-2026: -86bps

However, profit-taking nudged yields slightly upward on:
• NOV-2025: +8bps
• MAR-2026: +5bps

Momentum remains bullish, but some investors are locking in quick gains.

Eurobond Market: Foreign Appetite Grows

Nigeria’s Eurobond market also enjoyed a strong week, with average yields dropping from 8.97% to 8.61%. Foreign investors are showing renewed interest in emerging market debt, helped by improving risk sentiment.

Biggest yield drops occurred in:
• SEP-2033: -45bps
• FEB-2032: -44bps
• SEP-2028: -39bps

Global liquidity search is making Nigeria’s Eurobonds more attractive again.

What This Means for Investors

Bullish Sentiment is Broad-Based: From long-term bonds to T-Bills and Eurobonds, the market is seeing a liquidity-driven rally.
Inflation Outlook is Improving: Falling yield levels suggest investors expect inflation to moderate — a good signal for bond prices.
Timing is Everything: With rising demand and shrinking supply, early positioning could offer capital gains in the short term.

Final Word

The Nigerian fixed income market is flashing strong risk-off signals, with many investors rotating into government securities. Whether you’re a conservative saver, income-seeker, or tactical trader, now is a good time to monitor bond auctions, review your asset allocation, and potentially lock in favorable yields.