Yields Drop as DMO Reveals Plan to Sell N480 Bln Bond
The average yield on Federal Government of Nigeria (FGN) bonds in the secondary market fall on Thursday as the Debt Management Office (DMO) reveals a plan to raise N480 billion from the market in the first quarter of 2022.
A review of the document shows that exactly half of the planned Federal Government of Nigeria bonds issuance in the period are reopening, according to the DMO circular and the other half are fresh issuance.
In the Treasury Bills space, average yields on the instruments were steadied after spot rates on short and long-dated bills were priced higher at the primary market auction on Wednesday.
Despite robust subscription level at the auction, it was only a mid-tenor Treasury bills instrument that was priced down as analysts mull possible yield repricing pre-election year. Still, the absence of pressures on the financial system liquidity drags short term rates lower in the money market.
Data from the FMDQ Exchange shows that the average interbank rate declined by 150 basis points to close at 13.88%, following contractions at both the Open Buy Back rate and overnight lending rate.
Today, open repo slowdown by 150 basis points and Overnight lending decline at the same rate of 150 basis points to close at 13.50% and 14.25%, data confirms by Alpha Morgan Capital show.
In the secondary market, the Nigerian Treasury bill closed on a flat note with the average yield across the curve remaining unchanged at 4.5 per cent.
Analysts’ notes show that average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.50 per cent, 4.11 per cent, and 5.21 per cent, respectively.
Trading activities in the Open Market Operations for OMO bills ended on a calm note today as the average yield across the curve closed flat at 5.62 per cent, according to FSDH Capital. Read: CBN Sells N50 Bln OMO Bills at 7%, 8.5% and 10.10%
According to their notes, analysts said average yields across short-term and long-term maturities remained unchanged at 5.52 per cent and 5.71 per cent, respectively.
FGN bonds secondary market closed on a mildly positive note with average bond yield across the curve cleared lower by 3 basis points to close at 11.85 per cent from 11.88 per cent on the previous day.
However, average yields across short tenor, medium tenor, and long tenor of the curve decreased by 1 basis point, 2 bps, and 6 bps, respectively.
FSDH Capital sees the 18-JUL-2034 maturity bond as the best performer with a decrease in the yield of 41 basis points, while the 18-MAR-2036 maturity bond was the worst performer with an increase in the yield of 1 basis point.
The DMO has released its FGN Bonds Issuance Calendar for the first quarter of 2022, deepening the sovereign curve by introducing a new 20-year FGN bond, according to analysts.
The DMO is expected to offer bonds worth between ₦420-₦480 billion during the quarter through re-opening of 10-year (₦210-₦240 billion) and the new issue of the 20-year (₦210-₦240 billion) tenors.
Furthermore, the DMO has also released its FGN Bonds offer circular for January 2022 Primary Market Auction, indicating plans to offer FGN bonds worth ₦150 billion through re-opening of 10-year (₦75 billion) and new 20-year (₦75 billion) tenors.
The available document shows that the bond auction is scheduled to hold on January 19, with settlement on January 21.
