Benchmark Yield on Bonds Slip as Market Anticipates Rate Hike
Trading activities at the Nigerian bonds secondary market ended on a mixed note amidst interest rate hike expectations in the new week. The market opened on a soft note, with pockets of transactions, which kept yield movement in check ahead of the policy meeting.
Bond trading direction was mixed following signals that the Central Bank of Nigeria (CBN) would probably increase benchmark interest rate to anchor rising headline inflation. Some investors sought to take advantage of the attractive yield on the MAR-2025 bond amid sell-offs, traders said in a note.
Fixed income market analysts said majority of the trades were executed on the auction papers as portfolio managers adjusted their holdings following the outcome of the auction held at the start of the week
Subsequently, the average yield pared by 3 bps to 19.4%. In its market update, Cordros Capital Limited told investors that the average yield declined at the short (-43bps) end.
Fixed income market analysts attributed the yield contraction to investors demand for the MAR-2025 (-210bps) bond. However, yield expanded at the mid (+22bps) segment, driven by sell-offs of the FEB-2031 (+64bps) bond.
The average yield was unchanged at the long end, traders said. At the primary market auction, the Debt Management Office (DMO) offered instruments worth N120.00 billion to investors through re-openings of the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031.
The 5-year (April 2029) and 7-year (February 2031) bonds settled at higher rates of 21.00% (+25bps) and 22.00% (+26bps), respectively.
The total subscription level settled at N369.59 billion, a moderate reduction from the total of N389.24 billion recorded at the previous auction, with a bid-to-offer ratio of 3.1x.
Eventually, the DMO allotted instruments worth N346.16 billion across the two tenors, resulting in a bid-to-cover ratio of 1.0x. #Benchmark Yield on Bonds Slip as Market Anticipates Rate Hike Naira Plunges on Suboptimal FX Intervention
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