SAT, OCT 21 2023-theGBJournal|The Treasury bonds secondary market traded with bullish sentiments following investors’ interest in shorter-dated instruments and participants looking to the secondary market to fill unmet bids from Monday’s PMA.
Consequently, the average yield declined by 1bp to 14.4%. At this month’s FGN bond auction, the DMO offered instruments worth N360.00 billion to investors through re-openings of the 14.55% APR 2029 bond (Bid-to-offer: 0.5x; Stop rate: 14.9%), 14.70% JUN 2033 (Bid-to-offer: 0.3x; Stop rate: 15.8%), 15.45% JUN 2038 (Bid-to-offer: 0.7x; Stop rate: 15.8%), and 15.70% JUN 2053 (Bid-to-offer: 2.8x; Stop rate: 16.6%) bonds.
The subscription level settled at NGN383.11 billion, translating to a bid-to-offer ratio of 1.1x, with demand skewed towards the JUN 2053 bond (bid-to-offer: 2.8x).
The DMO eventually over-allotted instruments worth N374.76 billion (non-competitive allotments: N40.00 billion), resulting in a bid-to-cover ratio of 1.0x.
Over the medium term, we expect yields in the FGN bond secondary market to remain elevated, driven by the sustained imbalance in the demand and supply dynamics. However, we highlight that deliberate actions by the DMO to keep borrowing costs moderate remain a downside factor.
Meanwhile, the FGN Eurobonds market experienced a predominantly bearish trend throughout the week, characterized by widespread selling activities. As a result, the average benchmark yield increased by 79 basis points, ultimately settling at 12.66%.
We expect the market to be swayed by the U.S. ISM manufacturing PMI next week.
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