Return on FGN Bond Declines after DMO Auction
After the Debt Management Office, DMO, bond auction at the beginning of the week, the average yield declined to about 13% on Thursday as investors allocate more funds to fixed interest income assets.
Following a higher level of demand, the DMO sold more bonds as the agency secured a total bid of N805.2 billion, about four times its offer which resulted in mixed spot rates across dated FGN bonds instruments.
The detail showed DMO offered N360.0 billion worth of FGN Bonds for subscription but raised N662.6 billion on Monday. The large sum was raised through re-openings of the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 16.25% FGN APR 2037 and 14.80% APR 2049 FGN bonds as market participation surged. >>>Nigerian Treasury Bills Yield Falls Sharply to 1.47%
Market analysts told MarketForces Africa despite market dynamics, demand level has continued to maintain an uptrend at lower spot rates. Nigeria’s inflation rate pressure has worsened market return while market participants await catalysts to drive yield repricing.
Unfortunately, against expectation, the Central Bank of Nigeria’s hawkish pose has failed to trigger higher yield – even as the benchmark interest rate rose to 17.5% – on account of a higher level of liquidity in the financial system.
In the secondary market, traders said in their daily brief reviewed by MarketForces Africa that the prices of FGN bonds remained relatively flat for the bulk of maturities today. However, the average secondary market yield contracted by 6 basis points to 12.90% as asset managers reshuffled portfolios as part of their trading strategies to up returns.
According to Cowry Asset Management, the 20-year FGN note price increased due to increased demand, then its corresponding yield fell to 15.60% (from 15.80%). Meanwhile, the yields on the 10-year FGN bond, 15-year FGN bond, and 30-year FGN bonds were stable at 13.36%, 14.58%, and 14.96%, respectively.
Across the benchmark curve, market analysts at Cordros Capital said the average yield contracted at the short (-14bps) and long (-3bps) end. The contraction recorded occurred following buying interests in the JAN-2026 (-43bps) and APR-2037 (-21bps) bonds, respectively.
The average yield was flat at the mid-segment, according to fixed income analysts.
Analysts noted that in the international debt capital market, the value of the FGN Eurobond increased for most of the maturities amid sustained bullish sentiment. Notably, the average secondary market yield compressed to 11.49% as demand increased. # Return on FGN Bond Declines after DMO Auction
