Domestic Bonds Rally as Eurobonds Face Selling Pressure

The Nigerian secondary bond market closed last week on a bullish note, supported by strong investor demand across key maturities Increased buying interest drove bond price appreciation and pushed yields lower, reflecting sustained confidence in domestic fixed income instruments.

Consequently, the average FGN bond yield declined by 21 basis points week-on-week to close at 17.46%. The Debt Management Office (DMO), on behalf of the Federal Government of Nigeria (FGN), recorded robust investor demand at its July 2026 bond auction, with total subscriptions of N1.74 trillion against an offer of N1.20 trillion, representing an oversubscription rate of 1.87x.

The strong subscription underscores sustained confidence in sovereign debt instruments and the continued preference of institutional investors for attractive risk-free returns despite elevated inflation and tight liquidity conditions as the DMO eventually allotted N929.32 billion, alongside N50 billion in noncompetitive allotments, reflecting a measured borrowing strategy despite strong market appetite.

Demand was strongest for the Apr-2037 bond, while the Jan-2035 and Jun-2038 bonds also attracted healthy subscriptions.

Marginal rates cleared at 18.34%, 18.35%, and 18.40%, respectively, marking a modest 10-basis-point increase from the previous auction.

In contrast, the Nigerian sovereign Eurobond market recorded a bearish performance, as weaker demand and increased sell-offs across the yield curve led investors to reduce exposure to Nigeria’s dollar-denominated debt securities.

This decline in risk appetite resulted in a 9-basis point week-on-week increase in the average Eurobond yield to 6.98%. It is expected, the domestic bond market to remain supported by sustained investor demand and attractive yields, which may continue to drive buying interest across selected maturities. However, market activity could remain influenced by liquidity conditions, inflation expectations, and monetary policy direction.