Investors Interest in FGN Bond Declines, Yield Rises to 18.8%
Investors continue search for high yield investment option has continued to trigger portfolio adjustment, rebalancing amidst the worsening inflation condition in Nigeria. Last week, the average yield on Federal Government of Nigeria (FGN) bond spiked by 23 basis points in the secondary market over sustained risk off sentiment on local borrowing instruments.
Fixed interest securities investors launched a bearish investment journey, taking their funds elsewhere in search of inflation protected return amidst subdued rate on local bonds. Reflecting investors’ apathy, the Debt Management Office’s (DMO) bonds auction was greatly under subscribed over sustained negative interest yield amidst high inflation environment.
At the primary market auction, the DMO offered instruments worth N450.00 billion to investors through re-openings of the 19.30% FGN APR 2029 bond, 18.50% FGN FEB 2031 bond, and 19.89% FGN MAY 2033 bonds.
Notably, the auction recorded weak demand as total subscription level settled at N305.26 billion with a bid-to-offer ratio of 0.7x. Eventually, the DMO allotted instruments worth N297.01 billion across the three tenors, resulting in a bid-to-cover ratio of 1.0x.
According to the auction result, 5-Year bond was sold at 19.64%, 35 basis points above previous auction rate. Also, a 7-Year FGN bond was sold at 20.19%, which was 45 basis points above previous auction rate, while 10-year bond attracted 21.50%, 161 basis points above previous auction spot rate.
In the secondary market, trading activities were bearish as investors offloaded naira assets. Overall, the local bonds market closed bearish, with the average mid-yield rising by 23 bps to 18.84%, according to AIICO Capital Limited.
Across the benchmark curve, Cordros Capital Limited said the average yield increased at the short (+6bps) and long (+1 bps) ends. The yield surge was a results of selloff activities on the MAR-2025 FGN bond, causing its yield to rise by +13 bps and JUN-2053 by +10bps bps, respectively.
However, the average yield dipped at the mid (-70bps) segment due to demand for the JUN-2033 (-155bps) bond. #Investors Interest in FGN Bond Declines, Yield Rises to 18.8% Reforms: Fitch Revises Nigeria’s Outlook to Positive
