Yields Subdue as Investors Divest 2025, 2026 FGN Bonds
Trading activities in the secondary market for Federal Government of Nigeria (FGN) bonds ended on a quiet note as investors weigh impacts of interest rate hike on their portfolio.
The market remained subdued as investors divested from the MAR-25 and JAN-26, resulting in their yields rising by 2bps and 1bp respectively, traders at Cowry Asset Management Limited told investors.
However, the average yield remained at 18.6% while the apex bank raised the monetary policy rate to 26.25% to inflation which accelerated to 33.69% in April.
In a note, Cordros Capital Limited explained that the average yield increased slightly at the short (+1bp) end driven by sell pressures on the MAR-2025 FGN Bonds (+2bps). However, yield closed flat at the mid and long segments.
In their response to benchmark interest rate hike, analysts said they believe the outcome of this meeting may trigger further rounds of bearish sentiments across the mid-to-long end of the yield curve.
“Expect tomorrow’s Nigerian Treasury bills auction on Wednesday to give more clarity on the direction of yields in the secondary market”, Cordros Capital said in a post monetary policy committee meeting note.
Fixed income analysts advise investors to remain cautious about investing in long-duration instruments, which currently may not offer fair compensation for the risks of rising rates.
“We maintain our expectations that yields in the fixed-income market are bound to increase further from current levels. Our prognosis is further buoyed by the expectation of a sustained imbalance in the supply and demand dynamics in the fixed-income market”, Cordros Capital stated.
At this month’s bond PMA, the DMO offered instruments worth N450.00 billion to investors through two reopening and new issuance.
The auction was oversubscribed as the total subscription level settled at N551.32 billion while DMO allotted bonds worth N682.07 billion across the three instruments, resulting in a bid-to-cover ratio of 0.8x. The market value non-competitive allotments at N301.30 billion.
DMO sold 19.30% FGN APR 2029 bond at the rate of 19.29% and 18.50% FGN FEB 2031 bond at the stop rate of 19.74% – both of which are reopening bonds. In addition, the debt office also issued new FGN MAY 2033 bond at the spot rate of 19.89%. #Yields Subdue as Investors Divest 2025, 2026 FGN Bonds
