The Nigerian sovereign bond market shifted into negative territory this week, as a wave of sell pressure across the yield curve drove average yields upward. Market data reveals that the average yield across benchmark notes rose by 20bps, settling at 16.04 per cent, compared to the 15.85 per cent recorded in the preceding week.
The retreat was characterised by widespread divestment, particularly concentrated in the short-to-mid-end of the curve. Notable activity was seen in the Mar-27 instruments, which saw significant yield increases of +152bps and +41bps, while the Feb-28 and Apr-29 papers also faced upward pressure, rising by 62bps and 46bps, respectively.
Despite the overarching bearish sentiment, pockets of resilience remained. “While the broader market faced a retreat, we observed selective buying interest in the long end of the curve, specifically in the Jan-42 and Jul papers, as some investors looked to lock in higher duration at attractive entry points,” noted the Meristem Fixed Income Desk.
The bearish tilt extended to the secondary Treasury Bills market, where average yields increased by 3bps to finish at 17.47 per cent. This movement followed a week of active primary market auctions by the Central Bank of Nigeria.
The CBN’s latest OMO auction saw an offer of NGN 600.00bn, which was met with robust but slightly diminished demand compared to previous weeks. “The subscription-to-offer ratio of 3.70x at the OMO auction underscores the significant liquidity still seeking a home, even as stop rates cleared as high as 21.90 per cent for the 7-day maturity,” the report highlighted.
External factors continue to weigh heavily on investor sentiment. Global oil prices have remained elevated due to the ongoing US–Iran conflict, with Brent crude rising to USD 104.60/bbl. While higher oil prices generally support Nigeria’s fiscal revenue, they have simultaneously stoked global inflation expectations.
“The surge in energy prices has complicated the global rate outlook. Locally, this has kept real yields elevated and reduced the appetite for aggressive rate-cut bets, forcing a repricing of domestic instruments,” the analysts stated.
Looking ahead, the market is closely monitoring the Federal Government’s borrowing plans. With President Bola Tinubu seeking the Senate approval for a USD 516.33mn syndicated loan from Deutsche Bank for the Sokoto–Badagry Superhighway, concerns regarding debt sustainability remain a primary talking point.
“As Nigeria’s public debt lingers around the NGN 159.28trn mark, the market remains sensitive to new supply. We expect trading to remain cautious as investors weigh the benefits of infrastructure-led growth against the risks of a rising debt-to-GDP profile,” Meristem concluded.
