SAT 26 MARCH, 2022-theGBJournal| This week, trading in the Treasury bonds secondary market continued with bearish sentiments, following the lower demand observed across the curve as investors continued cherry-picking instruments with attractive yields.
The average yield expanded by 16bps to 10.7%. Across the benchmark curve, the average yield expanded at the short (+19bps), mid (+13bps) and long (+18bps) segments following investors’ profit-taking activities on the MAR-2024 (+57bps), FEB-2028 (+24bps) and JUL-2045 (+84bps) bonds, respectively.
At the bond auction on Monday, the DMO offered instruments worth NGN150.00 billion to investors through re-openings of the 12.50% FGN JAN 2026 (Bid-to-offer: 3.1x | Stop rate: 10.15%; previously 10.95%) and 13.00% FGN JAN 2042 (Bid-to-offer: 4.9x | Stop rate: 12.70%; previously 13.00%) bonds.
As anticipated, demand was strong, with a subscription level of NGN598.42 billion – the highest subscription level recorded in the year – translating to a bid-to-offer ratio of 4.0x.
The DMO eventually over-allotted instruments worth NGN297.01 billion (competitive allotments: NGN296.37 billion, non-competitive allotments: NGN0.64 billion), resulting in a bid-to-cover ratio of 2.0x.
In the medium term, we envisage an uptick in bond yields as the FGN’s borrowing plan (NGN2.57 trillion) for 2022FY points to elevated supply.
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