Investor sentiment in Nigeria’s secondary bond market weakened noticeably last week, pushing the market into bearish territory as sell-offs dominated trading across major sectors of the market.

Consequently, the cautious mood translated into higher yields, with the average yield edging up to 16.9 per cent, reflecting limited demand for local government securities amid persistent macroeconomic uncertainty.

Trading activity remained generally subdued as investors adopted a defensive posture in response to concerns around inflation expectations, liquidity conditions and the broader economic outlook.

The persistent sell pressure across the yield curve underscored a preference for cash preservation, with market participants demanding higher returns before committing funds to longer-dated instruments.

As a result, price weakness became evident across most bond tenors, reinforcing the negative tone that characterised the week’s trading sessions.

Despite the softness in the domestic bond market, Nigeria’s sovereign Eurobond segment recorded a contrasting performance, ending the week on a positive note.

Average yields on Nigerian Eurobonds declined by six basis points week-on-week to 7.05 per cent, supported by renewed investor interest and improved risk appetite for emerging and frontier market debt.

The rally reflected growing confidence in Nigeria’s external debt position, aided by relatively stable macroeconomic indicators and expectations that fiscal discipline will be maintained.

Market analysts noted that offshore investors appeared more comfortable with Nigeria’s external credit profile than conditions in the local debt market, as dollar-denominated instruments continue to offer attractive risk-adjusted returns.

The improved sentiment in the Eurobond space also benefited from a more benign global backdrop, which has encouraged selective inflows into higher-yielding sovereign credits.

Looking ahead, analysts at Cowry Asset Management said attention will turn to the primary market this week as the Debt Management Office (DMO) plans to raise a total of N900 billion through the auction of Federal Government bonds.

The offering will include the February 2031 seven-year reopening, alongside the February 2034 and January 2035 ten-year reopening issues.

The scale of the auction is expected to test investor appetite and could further influence yield movements across the domestic bond market.

They added that while the local bond market may continue to face pressure in the near term, the Nigerian sovereign Eurobond market is likely to remain supported by sustained foreign demand.

Barring major global shocks, analysts expect external debt instruments to continue attracting interest, even as domestic investors remain cautious and selective in their positioning.