The yields on Nigerian government bonds declined recently as investors showed increased interest in naira-denominated assets. In the bond market, some investors adjusted their portfolios by buying or selling bonds to maximize their returns......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
Demand for Specific Bond Maturities
Financial analysts at CardinalStone Limited observed that investors focused on short- and mid-term bonds, with significant demand for bonds maturing in April 2029 and July 2030. The yield on the April 2029 bond fell by 75 basis points (bps), while the July 2030 bond yield dropped by 19 bps.
At the beginning of the week, the bond market was bearish, meaning more investors were selling than buying. This caused some bond prices to drop, particularly for key maturities such as the April 2029, February 2031, and January 2035 bonds.
However, as the week progressed, some investors locked in profits ahead of an upcoming bond auction, leading to increased sell pressure on the February 2031 and January 2035 bonds. Trading activity was somewhat limited due to widening bid-ask spreads, meaning there was a significant difference between the prices buyers were willing to pay and the prices sellers wanted.
Mid-Week Market Movements and Yield Trends
Later in the week, activity in the bond market remained subdued. Although some yields rose by 5-10 basis points, the overall trend showed a decline in average mid-range yields due to sustained investor demand.
By the end of the week, the benchmark yields for key bonds had dropped:
April 2029 yield fell by 73 basis points to 20.86%.
February 2031 yield decreased by 25 basis points to 21.62%.
January 2035 yield declined by 35 basis points to 21.50%.
Long-Term Bonds and Investor Sentiment
On the longer end of the bond market, the yield on the June 2053 bond fell by 18 basis points to 17.60%. However, as the week concluded, trading activity slowed as investors became more cautious ahead of the first Monetary Policy Committee (MPC) meeting of the year.
Across different bond segments:
Short-term bonds saw a yield decline of 39 basis points.
Mid-term bonds experienced a drop of 22 basis points.
Long-term bonds fell by just 2 basis points.
This was largely driven by demand for specific bonds such as the January 2026 (-110 bps), July 2030 (-40 bps), and June 2053 (-18 bps).
Outlook for the Nigerian Bond Market
Market experts predict that sentiment in the bond market will remain mixed in the coming week. Investors are expected to focus on bonds that offer attractive yields, especially in the mid-term range. The overall market trend indicates a preference for stability, with investors selectively buying bonds that align with their risk and return expectations.