Nigerian Bond Yields Rise to 19.21% After Debt Management Office's Primary Market Auction

Following the recent primary market auction (PMA) on Monday by the Debt Management Office (DMO), the average yield on Nigerian government bonds has surged due to widespread selloffs in the secondary market.

Bond investors in Nigeria's fixed-income market are shedding assets in a bid to optimize portfolio returns, as negative yields persist amidst the local currency's depreciation. Inflation climbed to 31.70% in February, up by 180 basis points from January, primarily fueled by a spike in the food index driven by naira weakness.

Following the sell-off trend, the average yield increased by 23 basis points to close at 19.21%, fueled by intensified government bond selloffs in the secondary market, a trend that commenced the previous week.

Both short- and long-term debt instruments exhibited yield curve inversions, yet the central bank's decision to lower interest rates during the treasury bills auction may impact future rate movements.

In its market update, Cordros Capital Limited informed investors of an average yield rise at both the short (+80 bps) and long (+7bps) ends of the benchmark curve. Notably, market players divested the MAR-2027 (+171 bps) and APR-2049 (+56 bps) bonds, while the average yield remained steady in the mid-segment.

While the Debt Management Office elevated interest rates on bonds allocated to investors in the main market on Monday, Nigeria is poised to venture into the Eurobond market with plans to issue foreign currency bonds worth $1 billion.

Dispelling rumors, the Debt Management Office clarified that it had not obtained authorization to issue US dollar-denominated bonds to foreign investors, refuting claims linking Chapel Hill Denham, an investment firm owned by Finance Minister Wale Edun, as one of its advisers on the matter.