Cautious Calm Grips Nigerian Bond Market Ahead of DMO Auction Monday
The Nigerian bond market experienced subdued trading activity in the secondary market ahead of the Debt Management Office’s (DMO) April auction subscription opening on Monday.
Market observers indicated that government bond trading remained quiet throughout the previous week, with cautious interest focused primarily on intermediate-term securities.
Investment interest was particularly directed toward Federal Government of Nigeria (FGN) bonds with 2031 and 2034 maturity dates. Prior to the auction, investors generally maintained a cautious stance with measured optimism, given the uncertain outlook for interest rates.
On Wednesday, the Central Bank of Nigeria reduced spot rates for Nigerian Treasury bills but subsequently increased the discount rate at the Open Market Operations (OMO) bills auction on Friday by over 3% across two maturity periods.
This mixed policy approach contributed to limited bond market activity, as investors continued evaluating Nigeria’s slowing inflation, which has diminished real returns on debt market investments.
“Some cherry-picking was observed in select tenors, especially in June 2053 and other mid-duration papers, but overall market flow remained light,” AIICO Capital Limited noted in a market report.
Financial analysts pointed out that despite restrained trading sentiment, yields moved lower, indicating modest buying interest. However, the average yield increased slightly by 1 basis point to 19.0%. Across the benchmark curve, yields at the short end rose by 2 basis points.
This yield increase resulted from selling pressure on the January 2026 bond (+13 basis points), while yields declined in the mid-segment (-3 basis points) due to demand for the February 2031 bond (-14 basis points). The average yield at the long end remained unchanged.
“We believe the outcome of this month’s FGN bond auction on Monday will shape the direction of yields in the secondary market,” fixed-income market analysts at Cordros Capital Limited said. At the upcoming auction, the DMO plans to offer instruments valued at ₦350.00 billion through the reopening of the April 2029 and May 2033 bonds.
Looking ahead to the medium term, analysts predict a moderation in bond yields, influenced by two key factors: the anticipated accommodative monetary policy direction and continued improvement in market demand and supply dynamics during the second quarter of 2025.
