…FGN Eurobond market bearish
SAT APRIL 20 2024-theGBJournal|The FGN bond secondary market were muted for most of the week but turned bullish on Friday, the last trading day of the week, as the average yield dipped by 23bps at 19.0%.
Across the benchmark curve, the average yield declined at the short (-64bps) and mid (-7bps) segments as players demanded the MAR-2025 (-112bps) and JUL-2030 (-17bps) bonds, respectively, but advanced moderately at the long (+1bp) end due to the profit-taking activities on the MAR-2050 (+3bps) bond.
At this month’s bond PMA, the DMO offered instruments worth NGN450.00 billion to investors through new issuance of the 19.30% FGN APR 2029 (Bid-to-offer: 1.6x; Stop rate: 19.30%) bond and re-openings of the 18.50% FGN FEB 2031 (Bid-to-offer: 0.9x; Stop rate: 19.75%) and 19.00% FGN FEB 2034 (Bid-to-offer: 3.7x; Stop rate: 20.00%) bonds.
Demand was higher at the auction as the total subscription level settled at N920.09 billion (previous: NGN615.01 billion), with the DMO allotting bonds worth N626.81 billion across the four instruments, resulting in a bid-to-cover ratio of 1.5x.
Meanwhile, bearish sentiments dominated the FGN Eurobond market, driven by Powell’s indication of sustained higher rates and escalating tensions in the Middle East.
The selloff was compounded by US data releases, notably the initial jobless claims exceeding expectations at 215K versus an anticipated 212K, and the leading index declining to -0.1% from -0.30. As a result, the average benchmark yield surged by 20 bps week over week, reaching 9.76%.
Analysts at Cordros Research say they expect the treasury bonds secondary market to remain subdued, given investors’ sustained preference for shorter-dated instruments amid the weak macroeconomic profile.
”Over the medium term, we expect yields to remain elevated, driven by the anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics,” Cordros said.
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