SAT MARCH 01 2025-theGBJournal| The FGN bonds secondary market were bullish this week, reflecting investors’ reaction to the lower stop rates recorded at Monday’s FGN bond primary market auction.
Similarly, the Treasury bills secondary market was bullish this week as investors continued to reprice yields downwards in line with market dynamics
FGN bonds average yield decreased by 94bps to 18.5%. Across the benchmark curve, the average yield decreased at the short (-167bps), mid (-86bps), and long (-72bps) segments, driven by demand for the MAR-2025 (-454bps), JUL-2034 (-113bps), and MAR-2036 (-104bps) bonds, respectively.
At Monday’s PMA, the DMO offered instruments worth NGN350.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 2.3x; Stop rate: 19.20%) and 18.50% FGN FEB 2031 (Bid-to-offer: 7.8x; Stop rate: 19.33%) bonds.
Total subscription level settled at NGN1.63 trillion (previous: NGN669.94 billion), with a bid-to-offer ratio of 4.7x (previous: 1.5x).
The Debt Management Office (DMO) allotted instruments worth NGN910.38 billion across the two tenors, resulting in a bid-to-cover ratio of 1.8x. We attribute this surge in demand to investors’ expectations that stop rates have likely peaked and are unlikely to return to these levels in the near term.
Meanwhile, the average yield declined by 125bps to 21.1%. Across the market segments, the average yield declined by 31bps to 19.9% in the NTB segment, while it declined by 244bps to 22.5% in the OMO segment.
Following our expectations of liquidity influx into the financial system next week, we expect this to drive demand for bills, causing yields to decline. Additionally, the DMO is scheduled to conduct an NTB PMA next Wednesday (March 5) with NGN650.00 billion worth of maturities on offer.
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