SAT 23 OCT, 2021-theGBJournal- Proceedings in the Treasury bonds secondary market closed the week on a bearish note, as the average yield expanded by 6bps to 11.4%. We attribute the expansion in yields to investors’ reaction to the higher stop rates at the mid-week FGN bond auction albeit there were bids at the secondary market to fill unmet auction demand.
At the bond auction, the DMO offered instruments worth NGN150.00 billion to investors through re-openings of the 12.50% FGN JAN 2026 (Bid-to-offer: 1.0x; Stop rate: 11.65%, previously: 11.60%), 16.2499% FGN APR 2037 (Bid-to-offer: 1.6x; Stop rate: 12.95%, previously: 12.75%) and 12.98% FGN MAR 2050 (Bid-to-offer: 2.4x; Stop rate: 13.20%, previously: 13.00%) bonds.
As expected, demand was high (subscription: NGN250.71 billion; bid-to-offer: 1.7x) and the DMO eventually over-allotted instruments worth NGN192.76 billion, resulting in a bid-to-cover ratio of 1.3x.
In the short term, Cordros Research says they expect yields to hover around current levels, given our expectations of limited supply in Q4-21 and deliberate efforts by the DMO to reduce the government’s domestic borrowing cost.
Twitter-@theGBJournal|Facebook-The Government and Business Journal|email: govandbusinessj@gmail.com
