SAT, MAY 20 2023-theGBJournal | This week, the FGN bonds secondary market closed mixed, albeit with a bearish tilt as the average yield expanded by 5bps to 14.1%.
We attribute these sentiments to the tepid demand for instruments in this space, given that most investors got filled at the primary auction on Monday.
Across the benchmark curve, the average yield expanded at the short (+7bps) and long (+8bps) ends following selloffs of the MAR-2024 (+49bps) and APR-2037 (+35bps) bonds, respectively. Conversely, the average yield was flat at the mid segment.
At this month’s auction, the DMO offered instruments worth N360.00 billion to investors through re-openings of the 13.98% FEB 2028 (Bid-to-offer: 0.8x; Stop rate: 14.10%), 12.50% APR 2032 (Bid-to-offer: 0.1x; Stop rate: 14.90%), 13.00% JAN 2042 (Bid-to-offer: 0.6x; Stop rate: 15.69%), and 12.98% MAR 2050 (Bid-to-offer: 3.8x; Stop rate: 15.80%) bonds.
The subscription level settled at N478.92 billion, translating to a bid-to-offer ratio of 1.3x (vs bid-to-offer ratio of 1.2x at the previous auction).
Eventually, the DMO over-allotted instruments worth N545.26 billion (including non-competitive allotments: N177.10 billion), resulting in a bid-to-cover ratio of 0.8x.
Activities in the Treasury bills secondary market turned bearish this week, as local investors looked to raise funds, triggered by the depressed system liquidity in the market. As a result, the average yield across the market expanded by 33bps to 7.0%.
We envisage lower yields in the Treasury bills secondary market next week, with system liquidity expected to be buoyant. In addition, we expect market focus to be shifted to the NTB PMA holding on Wednesday (24 May), where the CBN is scheduled to roll over NGN180.45 billion worth of bills.
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