Bonds Yield Up as Traders Open Short Positions Ahead of Auction
The Federal Government of Nigeria (FGN) bonds secondary market ended the trading sessions with selloffs as fixed interest securities traders opened short positions ahead of Debt Management Office (DMO) monthly primary market auction.
Details from the debt office bond calendar showed that the authority will be offering N200 billion worth of local borrowing instruments to investors at the primary market auction on Monday.
The authority will re-open 19.30% FGN APR 2029 bonds and 18.50% FGN FEB 2031 bonds, while the FGN MAY 2033 bond is now off-the-run, according to investment banking firms.
The bond market experienced mixed to bearish sentiments, with sideways interest noted in specific maturities, particularly in April 2029, February 2031, May 2033, March 2050, and June 2053 bonds.
Most traders opened short positions ahead of this month’s bond auction amid the disappointing consumer price index, which surged by +55 basis points to 32.70% year on year, Cordros Capital Limited said in a note.
Due to decision to trim holdings ahead of the auction and reduce bonds supply, the average yield inched higher by 20 basis points to 19.3%.
Across the benchmark curve, the average yield expanded at the short (+35bps), mid (+22bps), and long (+17bps) segments, according to analysts note.
The yield surge was noted to have been driven by sell pressures from investors taking out profit on the MAR-2025 (+130bps), FEB-2031 (+58bps) bonds, and JUN-2038 (+156bps), respectively.
“We believe the direction of yields in the secondary market will be shaped by the outcome of this month’s FGN bond auction scheduled to hold on Monday”, analysts at Cordros Capital Limited said.
Analysts said they medium-term expectation of elevated yields consequent on anticipated monetary policy administration globally and domestically, and sustained imbalance in the demand and supply dynamics. #Bonds Yield Up as Traders Open Short Positions Ahead of Auction
