SAT 19 FEB, 2022-theGBJournal- The Treasury bonds secondary market also closed the week on a bullish note, as yields adjusted to reflect the unexpectedly lower rates at Wednesday’s auction, and market participants looked to the secondary market to fill unmet demand from the auction.
Consequently, the average yield contracted by 36bps to 11.2%. Across the benchmark curve, the average yield moderated at the short (-50bps), mid (-60bps) and long (-11bps) segments due to investor’s demand for the MAR-2025 (-114bps), FEB-2028 (-90bps) and JUL-2034 (-27bps) bonds, respectively.
At this month’s bond auction, the Debt Management Office (DMO) offered instruments worth NGN150.00 billion to investors through re-openings of the 12.50% FGN JAN 2026 (Bid-to-offer: 4.3x; Stop rate: 10.95%, previously 11.50%) and 13.00% FGN JAN 2042 (Bid-to-offer: 3.1x; Stop rate: 13.00%, unchanged) bonds.
As anticipated, demand was higher (subscription: NGN557.72 billion; bid-to-offer: 3.7x) than January’s auction (Subscription: NGN325.24 billion; Bid-to-offer: 2.2x). The DMO eventually over-allotted instruments worth NGN415.42 billion across the competitive (NGN297.39 billion) and non-competitive (NGN118.03 billion) bids.
In the medium term, we still expect frontloading of significant borrowings for the year by the FG to result in an uptick in bond yields, as investors demand higher yields in the face of elevated supply.
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