FGN Bond Yield Rises as DMO Plans to Increase Supply
Trading activities in the secondary market for Federal Government of Nigeria (FGN) bonds closed on a mixed note, albeit with bearish performance as the Debt Office doubled down on supply.
The Debt Management Office (DMO) has notified the market of its intention to increase bond offer size to N80 billion each for new and reopening borrowing instruments at the auction scheduled for next week.
This is a sharp reversal from the recent past trend where N40 billion worth of reopening bonds were offered, though DMO increased allotments to investors at its July auction. The Nigerian secondary bond market recorded mixed trading activity during the week, with mild buying and selling interest observed across all tenor segments.
This resulted in a modest 16 bps uptick in the average yield to 16.62%, as investors adopted a cautious stance amid tight system liquidity and the absence of strong primary market catalysts.
Trading activity was initially skewed toward short- and mid-dated maturities, while longer-term bonds came under selling pressure, most notably the FGN 2037 and FGN 2038, whose yields rose by 52 bps to 16.09% and 19 bps to 15.87%, respectively.
This weakness was partly offset by a notable gain in the 14.55% FGN 2029, which saw its yield drop by 35 bps to 16.42%, Cowry Asset Management Limited said in its investor note.
Fixed-interest securities analysts said market sentiment weakened further after the DMO revealed a higher-than-anticipated bond auction size and unveiled a new 5-year NIGB AUG 2030 issue, which pushed yields upward across much of the mid-curve.
In contrast, the sovereign Eurobond market posted a mild bullish performance during the week, with broad-based demand across the curve. Consequently, average Eurobond yields declined by 2 bps week-on-week to 7.96%, reflecting renewed investor appetite for high-yield emerging market debt, Cowry Asset Limited said.
The bond market is expected to trade quietly, as investors adopt a cautious stance while the DMO fine-tunes supply. Selective demand at attractive points may spur mild rallies, but tight liquidity and the absence of new issuance in the week should keep yields range-bound. FirstHoldco Faces Tough Earnings Outlook, Plans to Sell Shares Privately
