SAT FEB 01 2025-theGBJournal| FGN Bonds yield fell by 3bps to 20.7% at close of trading Friday, driven by investor’s interests in the auction bonds and as traders reduced short positions.
Across the benchmark curve, the average yield declined at the short (-48bps) and mid (-7bps) segments, driven by demand for the MAR-2025 (-148bps) and APR-2032 (-16bps) bonds, respectively, while it expanded at the long (+1bp) end, specifically as investors sold off the JAN-2042 (+16bps) bond.
At Monday’s PMA, the DMO offered instruments worth N450.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 0.9x; Stop rate: 21.79%) and 18.50% FGN FEB 2031 (Bid-to-offer: 1.2x; Stop rate: 22.50%) bonds, while opening the JAN-2035 (Bid-to-offer: 2.0x; Stop rate: 22.60%) bond.
Total subscription level settled at N669.94 billion (previous: 278.82 billion), with a bid-to-offer ratio of 1.5x (previous: 2.3x).
Eventually, the DMO allotted instruments worth NGN606.46 billion across the three tenors, resulting in a bid-to-cover ratio of 1.1x.
At the money market, the overnight (OVN) rate expanded by 207bps w/w to 29.6% as late system debits on the last trading day and outflows for the FGN bond PMA (N601.04 billion) offset the inflows from OMO maturities (N317.66 billion).
Nonetheless, the average liquidity for the week was strong, settling at a net long position of N514.01 billion (vs net short position of N23.68 billion in the prior week).
Barring any liquidity management measures by the CBN next week, we expect system liquidity to remain strong, causing the OVN rate to trend lower.
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