Rates on Govt. Bonds Rise as Traders Dump Debt Instruments

Rates on Govt. Bonds Rise as Traders Dump Debt Instruments

Average rates on Federal Government of Nigeria (FGN) bonds rise for most maturities tracked this week as traders dumped debt instruments, analysts said while noting that market awaits rate hike in the next Treasury bill auction.

In the just concluded week, bearish sentiment continued to dominate the bond market as the values of FGN bond traded at the secondary market depreciated as yields expanded for all maturities.

Specifically, Cowry Asset Management stated that the 20-year, 16.25% FGN MAR 2037 lost N8.41; its corresponding yield rose to 12.46% from 11.50% as investors continue to sell-off on long dated bonds to mitigate interest rate risk.

Similarly, the 5-year, 14.50% FGN JUL 2021, 7-year 13.53% FGN APR 2025 and 10-year 16.29% FGN MAR 2027 lost N0.22, N0.45 and N4.03 respectively.

Meanwhile, their corresponding yield rose to 2.60% (from 2.56%), 9.02% (from 8.92%) and 11.28% (from 10.48%) respectively.

Analysts said the value of FGN Eurobonds traded at the international capital market rose for all maturities tracked; the 10-year, 6.375% JUL 12, 2023 paper, the 20-year, 7.69% FEB 23, 2038 paper and the 30-year, 7.62% NOV 28, 2047 debt gained USD0.24, USD2.49 and USD2.48 respectively.

Also, their corresponding yields decreased to 3.02% (from 3.15%), 7.63% (from 7.90%) and 7.67% (from 7.89%) respectively.

“In the new week, we expect local over-the-counter bond prices to appreciate and yields to decrease amid expected boost in financial system liquidity”, Cowry Asset said.

The Debt Management Office (DMO) hinted through its director general, Patience Oniha, on Eurobond sales plan this year.

This comes after other African sovereigns, Ghana, Egypt, Ivory Coast and Benin Republic, have tested the waters in the Eurobond market this year.

Although the details of the sales is sketchy, the fund is projected to finance the budgeted ₦2.3 trillion ($6.1bn) expected from foreign sources and roll over debt after the $500.0 million Eurobond payment in January.

Afrinvest’s analysts’ assessment indicated that activity in the bond market remained lacklustre following weak demand as investors remain on the sideline ahead of an expected rise in rates at the coming T-bills auction.

Accordingly, yield trended higher on all trading sessions thus average yield climbed 42 basis points to 10.3%. Across tenor, sell pressure was dominant in long-term bonds as yield rose 71bps week on week. 

Across SSA Eurobonds market under Afrinvest coverage, demand was strong this week following renewed interest in the market, hence average yield fell 28 basis points to 7.8%.

However, yield on all instruments fell this week save the Ghanaian 2023 instrument which rose 6bps week on week. Afrinvest said the Senegalese 2021 and Ghanaian 2025 instruments saw the most buying interest as yield declined 277bps and 45bps.

Read Also: Yields on Bonds Rise as DMO Issues Borrowing Plan

Rates on Govt. Bonds Rise as Traders Dump Debt Instruments