FGN Bonds Price to Slide as Sukuk Sees Rate Repricing -Analysts
Federal Government of Nigeria (FGN) bond price is expected to adjust downward this week following Sukuk rate repricing as the market witnessed a 0.2 percentage point increase.
However, ahead of the Christmas celebration, FGN Bonds yields fall for most maturities due to buying pressures. Also, other fixed interest rate instruments cleared lower.
Specifically, the value of 5-year, 13.53% FGN APR 2025 paper, the 10-year 16.29% FGN MAR 2027 bond and the 20-year 16.25% FGN MAR 2037 debt increased by N0.01, N0.02 and N0.40 respectively.
Consequent to higher demand across the curve, bonds corresponding yields fell to 10.59% (from 10.56%), 12.21% (from 12.22%) and 13.00% (from 13.05%) respectively.
However, the 10- year 13.98% FGN MAR 2028 debt yield was flattish at 12.44%, according to Cowry Asset Management Limited note.
Nigeria’s debt management office (DMO) announced the N250 billion Sukuk was 346 per cent oversubscribed. The increase in demand for the instrument was however connected to adjustment in rate offers to attract fixed income investors.
The rate on 10-year Sukuk bonds was adjusted to 13% from 12.80 following a quiet trading session at the federal government bonds secondary market in the just concluded week.
For the year, Nigeria’s debt office had pursued a domestic funding target of ₦2.74 trillion which includes the supplementary budget passed in 2021.
The sum, according to analysts, include competitive & non-competitive sales to public agencies, noting that the DMO has raised around ₦2.70 trillion at its bond auctions in the year.
Even without the small sums it makes from selling other instruments such as Sukuk, FGN savings bonds, and green bonds, the DMO has comfortably achieved its domestic funding target”, FSDH Capital said in a market report.
Elsewhere, the value of FGN Eurobonds traded at the international capital market appreciated for most maturities tracked on renewed bullish sentiment, Cowry Asset hinted in a note.
Analysts noted that the 20-year, 7.69% FEB 23, 2038 paper and the 30- year, 7.62% NOV 28, 2047 debt gained $0.26 and $0.20 respectively; their corresponding yields moderated to 8.67% (from 8.70%) and 8.74% (from 8.76%) respectively.
However, the 10-year, 6.375% JUL 12, 2023 bond, lost $0.05, its corresponding yield rose to 4.42% (from 4.41%).
“We expect the value of FGN Bonds to fall -and yields to rise- as the rate of the N250 billion worth of 10-year 12.80% Sukuk bonds was reviewed upward to 13.00%”, analysts stated. # FGN Bonds Price to Slide as Sukuk Sees Rate Repricing -Analysts
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