Bond Market on Fire: Nigerian Yields Jump to 15.6% as Investors Go Defensive
Nigeria’s secondary bond market closed last week with a sharp surge in yields to 15.61%, signalling a clear shift toward investor caution and a more bearish tone across the fixed-income space. Here’s the full breakdown.
What Triggered the Yield Spike?
Bond yields rose because investors sold off heavily, demanding higher returns to compensate for:
• Rising inflation
• Liquidity pressures
• Uncertainty around government reforms
• Expectations of tighter monetary policy
Trading was generally quiet, showing a weak appetite for naira bonds despite ongoing volatility in other markets.
Where Investors Focused Their Activity
Market activity clustered around three key maturities:
• 2034 Bonds
• 2037 Bonds
• 2038 Bonds
These issues attracted the most trades and provided some stability to the curve, but not enough to stop yields from rising overall.
Big Move of the Week: DMO’s Massive N460bn Auction
The Debt Management Office (DMO) held a large bond auction offering:
• AUG-2030 — N230bn
• JUN-2032 — N230bn
This was a major jump from the previous N260bn total auction.
Subscription Breakdown
• Total subscriptions: N657.26bn
• JUN-2032 paper was the star performer: N509.39bn interest
• Total allotment (incl. non-competitive bids): ~N589bn
• Bid-to-cover ratio: 1.28x
Stop Rates Increased
• AUG-2030: 15.90%
• JUN-2032: 16.00%
This confirms that investors now want higher compensation for risk, anticipating further repricing ahead.
Meanwhile, Eurobonds Are Booming — A Total Contrast
While local bonds struggled, Nigeria’s Eurobonds rallied strongly, with yields falling 33 basis points to 7.43%.
Why Investors Are Bullish on Nigeria’s External Debt:
• More stable external reserves
• Improved fiscal signals
• Renewed foreign investor confidence
• Better macroeconomic outlook from the global market’s perspective
This created a clear disconnect between domestic risk sentiment and foreign confidence in Nigeria.
Analyst Outlook: What Happens Next?
Domestic Bonds (Local Market)
Analysts at Cowry Research expect:
• Continued pressure on yields
• Persistent risk aversion by local investors
• Elevated yields driven by
• Inflation concerns
• Uncertain reform timelines
• Expected monetary tightening
Eurobonds (External Market)
Upward momentum likely to continue due to:
• Improved macro stability
• Stronger foreign interest
• Attractive yield levels compared to peer countries
What This Means for Investors
• Higher local yields = better entry opportunities, but with higher risk.
• Eurobonds show confidence, ideal for investors seeking global exposure with relatively lower volatility.
• Divergence between the two markets may continue until local macro conditions stabilise.
Nigeria’s secondary bond market closed last week with a sharp surge in yields to 15.61%, signalling a clear shift toward investor caution and a more bearish tone across the fixed-income space. Here’s the full breakdown.
What Triggered the Yield Spike?
Bond yields rose because investors sold off heavily, demanding higher returns to compensate for:
• Rising inflation
• Liquidity pressures
• Uncertainty around government reforms
• Expectations of tighter monetary policy
Trading was generally quiet, showing a weak appetite for naira bonds despite ongoing volatility in other markets.
Where Investors Focused Their Activity
Market activity clustered around three key maturities:
• 2034 Bonds
• 2037 Bonds
• 2038 Bonds
These issues attracted the most trades and provided some stability to the curve, but not enough to stop yields from rising overall.
Big Move of the Week: DMO’s Massive N460bn Auction
The Debt Management Office (DMO) held a large bond auction offering:
• AUG-2030 — N230bn
• JUN-2032 — N230bn
This was a major jump from the previous N260bn total auction.
Subscription Breakdown
• Total subscriptions: N657.26bn
• JUN-2032 paper was the star performer: N509.39bn interest
• Total allotment (incl. non-competitive bids): ~N589bn
• Bid-to-cover ratio: 1.28x
Stop Rates Increased
• AUG-2030: 15.90%
• JUN-2032: 16.00%
This confirms that investors now want higher compensation for risk, anticipating further repricing ahead.
Meanwhile, Eurobonds Are Booming — A Total Contrast
While local bonds struggled, Nigeria’s Eurobonds rallied strongly, with yields falling 33 basis points to 7.43%.
Why Investors Are Bullish on Nigeria’s External Debt:
• More stable external reserves
• Improved fiscal signals
• Renewed foreign investor confidence
• Better macroeconomic outlook from the global market’s perspective
This created a clear disconnect between domestic risk sentiment and foreign confidence in Nigeria.
Analyst Outlook: What Happens Next?
Domestic Bonds (Local Market)
Analysts at Cowry Research expect:
• Continued pressure on yields
• Persistent risk aversion by local investors
• Elevated yields driven by
• Inflation concerns
• Uncertain reform timelines
• Expected monetary tightening
Eurobonds (External Market)
Upward momentum likely to continue due to:
• Improved macro stability
• Stronger foreign interest
• Attractive yield levels compared to peer countries
What This Means for Investors
• Higher local yields = better entry opportunities, but with higher risk.
• Eurobonds show confidence, ideal for investors seeking global exposure with relatively lower volatility.
• Divergence between the two markets may continue until local macro conditions stabilise.