Rates Swing as DMO Sells Old, New Bonds to Investors
Patience Oniha, DMO Boss

Rates Swing as DMO Sells Old, New Bonds to Investors

Nigeria’s bond rates; yield swung as the Debt Management Office (DMO) raised more than N427 billion from its auction sales on Monday, auction results posted on its website showed. This comes in addition to non-competitive allotment totaling N46 billion.

Market participants in the secondary market however reacted to the auction as Nigeria’s bonds and Eurobond cleared sideway amidst the DMO auction where it offered N360 billion instruments for subscriptions.

Analysts said the mood has been slightly bullish since the last primary market auction, as the average bond yield fell to 13.78% as of June 16 from 14.31% at the previous auction date.

Total subscriptions for each bond class showed investors apathy for its new 10-year bonds as demand fell behind the sum offered for subscription.  In its auction result, successful bids for the 14.55% FGN APR 2029 (Re-opening, 10-Year Bond) were allotted at a marginal rate of 13.90%.

At the auction held in May, demand for the offered instruments increased marginally relative to the auction held in April. The total subscription was higher by 7.86% than the previous auction at N478.92 billion vs N444.03 billion in April, Meristem said in its pre-auction note.

In May, the marginal rates on the FEB 2028, APR 2032 and JAN 2042 bonds increased by 10, 20, and 29 basis points to 14.10%, 14.90%, and 15.69%, respectively, while that of APR 2049 remained flat at 15.80%.

Yesterday, DMO offered N90 billion worth of bonds, but investors’ subscriptions came to N154.340 billion. However, N86.362 billion was allotted to the market. 

Also, the local debt agency sold a 10-year new 14.70% FGN JUN 2033 bond at a marginal rate of 14.70%. Subscription for the new bond came at N34.453 billion, below the offered sum of N90 billion and DMO only allotted N18.570 billion at the auction to investors.

FGN 15.45% FGN JUN 2038 (New, 15-Year Bond) was sold at a marginal rate of 15.45% with a total subscription at N152.612 billion, higher than N90 billion offered for subscriptions to investors. DMO sold N100.643 billion worth of the new 15-year bond to successful investors. 

Also, 15.70% FGN JUN 2053 (New, 30-Year Bond) was allotted at a marginal rate of 5.70%. The very long-dated debt instruments received higher attention with total subscriptions coming at N293.712 billion. However, DMO then sold N221.562 billion worth of the 30-year new bonds to investors.

Meristem Securities analysts said in a note that the total amount on offer is expected to be between N320 billion and N400 billion from four issues – including one re-opening issue (APR 2029) and three new issues.

In the bond space, the prices of FGN bonds remained essentially flat across most maturities. Cowry Asset Management Limited told investors that the average yield in the secondary market remained unchanged at 13.49%.

Specifically, the investment said the 10-year, 20-year, and 30-year debt yields experienced minimal fluctuations as they closed unchanged at 14.23%, 15.35%, and 15.64%, respectively.

Elsewhere, the value of the FGN Eurobond closed lower for the bulk of maturities tracked amid renewed bearish sentiment. Traders reported that offers were pronounced at the curve’s near and far ends while the bulls took charge of the belly.

Consequently, the average secondary market yield expanded to 11%. Having noted the mixed trading pattern in the secondary market, TrustBanc Capital Limited explained to investors in a note that most trading efforts were concentrated at the belly of the curve.

Despite the auction, the investment firm said local investors exited Apr-37 (+57bps) and Mar-36 (+10bps) while Jul-34 (-9bps) and Jan-42 (-5bps) saw moderate buy-side activities. It said the average yield cleared sideways at 14.13%.

“In the near term, we believe the outcome of the bond auction will shape trading bias”, TrustBanc Capital said in its market brief. #Rates Swing as DMO Sells Old, New Bonds to Investors Naira Steadies as Banks Issue Update on FX Purchase

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