…The DMO allotted instruments worth N297.01 billion across the three tenors, resulting in a bid-to-cover ratio of 1.0x
SAT JUNE 29 2024-theGBJournal|The Treasury bonds secondary market closed on a bullish note this week, underpinned by buying activities on the APR-2032 (-155bps) and JUN-2033 (-155bps) papers.
Consequently, the average yield contracted by 3bps to 18.7%. Across the benchmark curve, the average yield increased at the short (+6bps) and long (+1bp) ends as players sold off the MAR-2025 (+13bps) and JUN-2053 (+10bps) bonds, respectively.
However, the average yield dipped at the mid (-70bps) segment due to demand for the JUN-2033 (-155bps) bond.
At Monday’s primary market auction, the Debt Management Office (DMO) offered instruments worth N450.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 0.2x; Stop rate: 19.64%), 18.50% FGN FEB 2031 (Bid-to-offer: 0.4x; Stop rate: 20.19%) and 19.89% FGN MAY 2033 (Bid-to-offer: 1.5x; Stop rate: 21.50%) bonds.
Notably, the auction recorded weak demand as total subscription level settled at N305.26 billion (previous: N551.32 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.
Taking a cue from the muted interest shown by players at the month’s FGN bond PMA and post-auction sell-offs, especially on the MAY-2033 (+108bps) bond, we think the risk-off approach of investors in the FGN bond secondary market would likely persist.
Meanwhile, we maintain our medium-term expectation of elevated yields consequent to anticipated monetary policy administration globally and domestically, and sustained imbalance in the demand and supply dynamics.
At the FGN Eurobond Market, bearish sentiments showed early in the week due to expectations of no rate cuts this year and a decline in US consumer sentiment, despite the latter closing higher than expected.
The market was also influenced by the ongoing impact of the Ghana Eurobond restructuring plan.
However, towards the end of the week, the market turned bullish, supported by US PCE prices closing as expected at 2.60%, down from the previous 2.80%.
Hence, average benchmark yield dipped marginally by a basis point, closing the week at 9.93%.
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