SAT, JULY 22 2023-theGBJournal |The FGN bonds secondary market closed the week on a bullish note as investors looked to cover for their lost bids at Monday’s PMA.
As a result, the average yield across all instruments contracted by 1bp to 12.7%. Across the benchmark curve, the average yield dipped at the short (-10bps) and long (-6bps) ends, following buying interests in the MAR-2025 (-47bps) and JUN-2053 (-31bps) bonds, respectively.
Conversely, the average yield expanded at the mid (+10bps) segment as investors sold off the APR-2029 (+31bps) bond.
At this month’s auction, the DMO offered instruments worth N360.00 billion to investors through re-opening of the 14.55% FGN APR 2029 (Bid-to-offer: 1.1x; Stop rate: 12.5%), 14.70% FGN JUN 2033 (Bid-to-offer: 0.6x; Stop rate: 13.60%), 15.45% FGN JUN 2038 (Bid-to-offer: 2.1x; Stop rate: 14.10%), and 15.70% FGN JUN 2053 (Bid-to-offer: 6.7x; Stop rate: 14.30%) bonds.
The subscription level settled higher at NGN945.14 billion, translating to a bid-to-offer ratio of 2.6x (vs bid-to-offer ratio of 1.8x at last month’s auction).
Eventually, the DMO allotted instruments worth N657.83 billion (including non-competitive allotments of N1.10 billion), resulting in a bid-to-cover ratio of 1.4x.
A total of 150,193 units valued at N158.210 million were traded this week in 23 deals compared with a total of 20,386 units valued at N21.934 million transacted last week in 14 deals.
Meanwhile, analysts at Cordros Research say they expect yields in the FGN bond secondary market to remain elevated in the medium term, specifically driven by our expectation of a sustained imbalance in the supply and demand dynamics.
However, they highlight that ”deliberate actions by the DMO to keep the cost of borrowing moderate and a possible maturity of CBN special bills present as downside factors.”
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