Sell Pressures on FGN Bond Push Yield to 13%
The average yield on the Federal Government of Nigeria (FGN) bonds tracked higher on sustained pressure on fixed income market instruments. Trading activities on Nigerian bonds turned bearish after a long bullish stay in the secondary market driven by investors’ sell-offs at the short and mid-spectrum of the curve, according to analysts.
Consequently, the average yield inched higher by 18 basis points to 13.0% on Friday, Cordros Capital said in its market note. Across the benchmark curve, traders explained the average yield expanded at the short (+56bps), mid (+4bps) and long (+7bps) segments as investors sold off the APR-2023 (+293bps), FEB-2028 (+19bps) and MAR-2035 (+52bps) bonds, respectively.
Nigeria’s Debt Management Office, DMO, revised the Q3-2022 FGN bond issuance calendar, reflecting that the DMO has replaced the 13.00% FGN JAN-2042 bond with the 16.25% FGN APR-2037 bond.
In the just concluded week, the value of FGN bonds moderated for all maturities tracked. Specifically, the 10-year 16.29% FGN MAR 2027, the 15-year 12.50% FGN MAR 2035 bond, and the 20-year 16.25% FGN MAR 2037 bond lost N0.03, N3.00, and N1.61 respectively, according to Cowry Asset weekly note.
Market analysts said these FGN bonds’ corresponding yields rose to 13.048% (from 13.047%), 13.68% (from 13.16%), and 13.68% (from 13.46%) respectively amid renewed sell pressure in the space. READ Rates on Govt. Bonds Rise as Traders Dump Debt Instruments
On the other hand, the 30-year 12.98% FGN MAR 2050 instrument stayed unchanged at N95.2 while its yield closed at 13.65%, according to analysts. Elsewhere, the value of FGN Eurobonds traded in the international capital market increased for all maturities due to sustained sell pressure.
Analysts’ market notes indicate the 10-year 16.29% FGN MAR 2027, the 15-year 12.50% FGN MAR 2035 bond, and the 20-year 16.25% FGN MAR 2037 bond gained US$1.15, US$3.89, and US$2.88 respectively.
Also, their corresponding yields fell to 9.51% (from 10.94%), 12.54% (from 13.35%), and 12.38% (from 12.95%), according to Cowry Asset Management Limited. Analysts at the firm said they expect to see increased bearish activity in the local bonds space as FGN Eurobonds yields appear to be relatively high.
On the local bond market, Cordros Capital maintained a view of an uptick in bond yields in the medium term, as the FGN’s borrowing plan for 2022 and expected fiscal deficit point towards an elevated supply. # Sell Pressures on FGN Bond Push Yield to 13%
