SAT OCT 26 2024-theGBJournal| The FGN bond secondary market edged higher Friday as market saw minimal activity this week, and with players primarily focused on the bond auction.
The average yield inched higher by 1bp to 19.3%. Across the benchmark curve, the average yield expanded at the short (+5bps) and long (+4bps) ends as investors sold off the JAN-2026 (+10bps) and JUN-2053 (+32bps) bonds, respectively.
However, the average yield contracted at the mid (-22bps) segment following interests in the FEB-2031 (-67bps) bond.
At Monday’s PMA, the Debt Management Office (DMO) offered instruments worth N180.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 0.3x; Stop rate: 20.75%) and 18.50% FGN FEB 2031 (Bid-to-offer: 3.7x; Stop rate: 21.74%) bonds.
Total subscription level settled at N389.24 billion (previous: 414.89 billion), with a bid-to-offer ratio of 2.2x (previous: 2.8x).
Eventually, the DMO allotted instruments worth NGN289.60 billion across the two tenors, resulting in a bid-to-cover ratio of 1.3x.
Given the demand trend witnessed in the FGN bond secondary market in the past weeks, we envisage a sustained rise in yields in the near term due to tight policy stance adopted by monetary authorities and sustained imbalance in the demand and supply dynamics, even as investors remain on the sidelines due to the depressed liquidity in the financial system.
The Treasury bills secondary market was bearish this week also as the average yield across all instruments expanded by 6bps to 24.9%.
Across the market segments, the average yield increased by 2bps to 24.2% in the NTB segment and rose by 18bps to 26.1% in the OMO segment.
At this week’s NTB auction, the DMO offered instruments worth N374.70 billion to investors – N13.14 billion for the 91-day, N11.59 billion for the 182-day, and N349.54 billion for the 364-day bills.
Aggregate subscription settled higher at N489.84 billion (previous: N271.87 billion), with a bid-to-offer ratio of 1.3x.
The auction closed with the DMO allotting exactly what was offered at respective stop rates of 17.00% (unchanged), 17.50% (unchanged), and 20.65% (previous: 19.86%).
We anticipate that the liquidity influx into the system next week will likely drive demand for instruments, causing a decline in yields in the secondary market.
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