TUE, APRIL. 18 2023-theGBJournal |Bearish sentiment continued to drive fixed-income markets last week as liquidity remained tight and investors sold positions across both the T-bill and Federal Government of Nigeria (FGN) bond markets.
Yields in the secondary market for Federal Government of Nigeria (FGN) bonds closed up 4bps to 13.72%. The yield on the 3-year bond advanced by 59bps to 12.62%, at 10-years rose by 1bp to 14.76% and the 7-years held steady at 14.36%.
At the FGN bond auction holding today, the Debt Management Office (DMO) is expected to offer N360.00bn (US$777.82m) across the February 2028 (reopening), April 2032 (reopening), April 2037 (reopening), and April 2049 (reopening) maturities.
The secondary market for T-bills was also bearish, with the average T-bill yield rising by 106bps to 8.82%. The increase in yield was most obvious at the short end (+103bps to 4.77%) and medium part (+125bps to 7.03%) of the curve. At the T-bill primary auction, the DMO offered and allotted N149.64bn (US$325.30m) worth of bills.
Demand was slightly stronger relative to the last auction. The auction recorded a total subscription of N280.35bn, implying a bid-to-cover ratio of 1.9x (vs 1.2x at the last auction).
The auction result was mixed as the stop rate on the 91-day bill (6.00%) and the 182-day (8.00%) remained unchanged while the stop rate on the 364-day (-4bps to 14.70%) moderated slightly.
Elsewhere, the yield on the 18-day OMO bill remained unchanged at 4.01%.
Short-term market liquidity swings are profoundly affecting yields, which are volatile from one week to the next.
Over the course of the year, we expect the overall direction of T-bill and FGN bonds to be upward as increases in government borrowing are felt by the market.
-Analysis is provided by Coronation Research
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