SAT MAY 24 2025-theGBJournal| The FGN bond average yield pared by 3bps to 19.0% on Friday, reflecting trading apathy ahead of the Debt Management Office (DMO) new instruments offer.
Across the benchmark curve, the average yield decreased at the short (-9bps) and mid (-1bp) segments, driven by demand for the JAN-2026 (-32bps) FEB-2031 (-5bps) bonds respectively, while it increased at the long (+1bp) end following selloffs of the APR-2037 (+3bps) bond.
Research analysts at Cordros Research say they believe the outcome of this month’s FGN bond auction on Monday will shape the direction of yields in the secondary market.
At the auction, the Debt Management Office (DMO) is set to offer instruments worth N300 billion through re-openings of the APR-2029 and MAY-2033 bonds.
Over the medium term, Cordros expect a moderation in bond yields, influenced by two factors – the anticipated dovish monetary policy stance and demand and supply dynamics.
Meanwhile, The overnight (OVN) rate declined by 4bps w/w to 26.9%, as inflows from OMO maturities (N1.14 trillion) and FGN bond coupon payments (N17.87 billion) offset debits for the OMO PMA (N655.25 billion) and net NTB issuance (N115.80 billion).
Accordingly, the average system liquidity improved, settling at a net long position of N646.50 billion (vs a net long position of N230.04 billion in the previous week).
Next week, barring any mop-up activity by the CBN, we expect inflows from OMO maturities (N987.22 billion) and FGN bond coupon payments (N5.63 billion) to offset expected debits for the FGN bond PMA (N300.00 billion), thus bolstering system liquidity.
As a result, we expect the OVN rate to taper from current levels.
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