Bonds Yields Moderate as Investors Oversubscribe DMO Auction
Investors in the fixed income market see the federal government bond yields moderate after the Debt Management Office (DMO) conducted a primary market auction that was heavily oversubscribed.
The Nigerian debt agency, DMO, had said in a circular it will re-issue a total sum of N150 billion Federal Government bond as part of an effort to finance government spending.
Yields have trended lower generally in the second half of the financial year 2021 as fixed income investors continue to earning negative returns on invested funds as subscription levels at government auctions remain strong.
In the money market, interbank rates advanced again as open buy bank and overnight lending rates closed higher as liquidity drops.
Data from the FMDQ platform shows that open buy back (OBB) witnessed a 150 basis points surge to 17%. Also, the overnight lending rate expanded by 175 basis points to 18.0%, a direction Cordros Capital attributes to the absence of significant inflows in the system.
While investors look out for catalysts to drive yields re-rating, declining headline inflation rate and the apex bank dovish stance keep the fixed income market largely unimpressive.
In the secondary market, the Nigerian Treasury bills closed flat as the average yield was unchanged at 5.5%, according to analysts’ reports.
Elsewhere, the average yield at the open market operations (OMO) segment expanded by 9 basis points to close the day at 6.4%.
It was also noted that trading activities in the secondary market for federal government bonds ended on a bullish note, as the average yield contracted by 7 basis points to 11.1%.
Across the benchmark curve, analysts at Cordros Capital hinted that the average yield contracted at the short (-15bps) and long (-3bp) ends following demand for the MAR-2027 (-61bps) and APR-2049 (-21bps) bonds; the mid-segment was flat.
At the auction, the DMO offered instruments worth N150.00 billion to investors through re-openings of the 13.98% FGN FEB 2028 with bid-to-offer of 1.1x and stop rate settled at 11.60%.
Read Also: Yields on Bonds Rise as DMO Issues Borrowing Plan
The 12.40% MAR 2036 re-openings see bid-to-offer ratio printed at 2.5x as stop rate came at 12.75% and 12.98% FGN MAR 2050 records bid-to-offer ratio of 3.1x, and stop rate clicked at 13.00%.
As investors seek investment windows that provide higher returns, the bond auction was oversubscribed today, a similar pattern that has been witnessed over time. Today’s subscription came at N334.32 billion.
Bonds Yields Moderate as Investors Oversubscribe DMO Auction
