FGN Bond Yield Falls ahead of DMO Auction
Patience Oniha, DMO Chief

FGN Bond Yield Falls ahead of DMO Auction

Amidst heated investment play in the Nigerian market, the Federal Government of Nigeria (FGN) bond yield tracked lower ahead of Debt Management Office’s (DMO) fresh foray into the debt capital market for primary market auction today. 

It is another FGN Bond reopenings worth N225 billion that will be auctioned today, split as N75 billion a piece for the 14.55% FGN APR 2029, 12.50% FGN APR 20232, and 16.25% FGN APR 2037.

MarketForces Africa reported that there was a lower subscription level at the previous auction as financial system liquidity was tight at the time and market sentiment had hit the iceberg but hope remains alive for strong demand in today’s auction – all things being equal.

In the secondary market, the FGN bonds secondary market turned bullish last week as the average yield dipped by six basis points to 14.5%, according to investment banking analysts’ notes obtained by MarketForces Africa.

The yield curve had risen above 14.6% as the market demanded higher returns to reduce exposures to Nigeria’s inflation rate reading which analysts projected could cross 21% in November from 20.77% in October 2022.

FGN Bond price fluctuation was attributed to investors’ decisions to cherry-pick maturities with attractive yields – particularly at the short and mid segments of the curve. In its market note, Cordros Capital analysts said the average yield contracted at the short (-15bps) and mid (-13bps) segments.

The yield curve shifted following bargain-hunting activities on the JAN-2026 and NOV-2029 bonds, respectively.

Due to buying interest in the JAN-2026 and NOV-2029 FGN Bond papers, their associated yields declined by 35 basis points, and 16 basis points, according to market data.

The value of the 15-year 12.50% FGN MAR 2035 bond and the 20-year 16.25% FGN MAR 2037 bond lost N0.51 and N1.24, respectively as a result of strong positioning by institutional investors. Consequently, the bond yields rose to 14.80% (from 14.70%) and 15.96% (from 15.74%).

Meanwhile, the yields on the 10-year 16.29% FGN MAR 2027 bond paper and the 30-year 12.98% FGN MAR 2050 stayed constant, closing the week at 14.59% and 14.95%, respectively. READ: Treasury, FGN Bond Yields Rise over Weak Liquidity

The trading record indicates there were selloffs at the long (+8bps) end as investors sold off the MAR-2036 (+37bps) bond. Analysts are expecting that the auction holding today will shape the sentiments in the bond secondary market.

In the foreign debt capital market, the value of FGN Eurobonds traded appreciated for all maturities tracked by Cowry Asset Management. The 10-year, 6.375% JUL 12, 2023, bonds; the 20-year, 7.69% paper FEB 23, 2038; and the 30-year, 7.62% NOV 28, 2047, gained USD 1.86, USD 11.26, and USD 10.81, respectively.

Meanwhile, bond instruments corresponding yields fell to 7.83% (from 10.72%), 11.70% (from 14.03%), and 11.28% (from 13.34%). #FGN Bond Yield Falls ahead of DMO Auction

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