…This week’s performance is attributed to players reacting to the DMO’s private auction of N2.36 trillion worth of FCY bonds on behalf of the CBN to settle its outstanding Forwards.
SAT, MAR 23 2024-theGBJournal|Bearish sentiments persisted in the Treasury bonds secondary market as the average yield vaulted by 82bps to 19.3% by close of trade Friday.
This week’s performance is attributed to players reacting to the DMO’s private auction of N2.36 trillion worth of FCY bonds on behalf of the Central Bank of Nigeria (CBN) to settle its outstanding Forwards.
Bonds issued include a MAR-2026 (N700.00 billion | new issue), MAR-2027 (N1.10 trillion | re-opening) and MAR 2028 (N558.24 billion | new issue), all closing at a stop rate of 21.00%.
At this month’s FGN bond auction, the Debt Management Office (DMO) offered instruments worth N450.00 billion to investors through new issuance of the 19.94% FGN MAR 2027 (Bid-to-offer: 1.8x; Stop rate: 19.9%), and re-openings of the 18.50% FGN FEB 2031 (Bid-to-offer: 0.4x; Stop rate: 20.0%) and 19.00% FGN FEB 2034 (Bid-to-offer: 2.0x; Stop rate: 20.5%) bonds.
The subscription level settled lower at N615.01 billion (vs previous auction: N1.92 trillion), translating to a bid-to-offer ratio of 1.4x. The DMO eventually over-allotted instruments worth N608.86 billion (non-competitive allotments: N133.20 billion), resulting in a bid-to-cover ratio of 1.0x.
Meanwhile, The FGN Eurobond market traded on mixed sentiments this week. Earlier in the week, we witnessed a bearish session as market participants waited on the FED interest rate decision.
However, the market saw bullish sentiments as investors reacted positively to the possibility of three rate cuts.
Furthermore, the S&P Global manufacturing PMI printed at 52.5 against the consensus of 51.7 while the Services PMI printed at 51.7 less than expectations of 52. Fed Chair Powell stated that the central bank cannot rely on only macroeconomic data but needs to hear from people and businesses.
Ultimately, the bulls dominated as the average benchmark yield dipped 61bps week-on-week, settling at 9.33%.
Demand in the FGN bonds secondary market has remained weak since the beginning of the year as investors maintained a risk-off stance for instruments amid the apex bank’s tight control on money supply into the economy.
In addition to the preceding, analysts at Cordros Research say they expect that anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics, will keep yields elevated in the market over the short-term.
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