Nigerian Bond Yield Rises to 19.56% after DMO High Auction Rates
Trading activities on FGN bonds securities ended on a bearish note in the secondary market as investors began to price in interest rate hike into their return target.
In their separate reports, a slew of fixed income traders generally said the bond market was calm. Local investors that participated in the primary bond auction at the beginning of the week and got full allotment on their bids.
This reduced trading activities in the secondary market space after spot rates adjustment on government borrowing instruments. Subsequently, the average yield inched higher by 4bps to 19.5%, Cordros Capital Limited told investors in an email note.
Traders said that across the benchmark curve, the average yield expanded at the short (+5bps), mid (+4bps) and long (+5bps) segments. The yields expansion was driven by profit-taking activities on the JAN-2026 (+15bps), JUN-2033 (+15bps) and MAR-2050 (+45bps) bonds, respectively.
At Monday’s primary market auction, the DMO offered instruments worth N300.00 billion to investors through re-openings of the 19.30% FGN APR 2029, 18.50% FGN FEB 2031 and 19.89% FGN MAY 2033 bonds.
The stop rates for the 2029, 2031, and 2033 papers closed higher compared to the previous auction at 19.89% (+0.25%), 21.00% (+0.81%), and 21.98% (+0.48%), respectively. 5-Year FGN bond was sold at the rate of 19.89%, 7-year bond was priced at 21% and 10-Year bond attracted 21.98% spot rate.
According to investment banking firms, the amount bet on FGN bond issuance at the auction remained soft as total subscription level settled lower at N279.66 billion from N305.26 billion achieved at the previous auction with a bid-to-offer ratio of 0.9x.
Auction results showed that the DMO allotted instruments worth N225.71 billion across the three tenors, resulting in a bid-to-cover ratio of 1.2x
Analysts said given the demand trend witnessed in the FGN bonds secondary market in the past weeks, we envisage a sustained rise in yields in the near term as investors remain on the sidelines due to the relatively lower yields.
“While we maintain our medium-term expectation of yields remaining elevated consequent to anticipated monetary policy administration globally and domestically
“…and sustained imbalance in the demand and supply dynamics, we envisage that we are nearing the peak of yields during the cycle, despite the still significant borrowing profile expected over H2-24”, Cordros Capital Limited said in its note. Canada Stun France With Dramatic 2-1 Win as US, Spain Advance
