TUE. 28 MARCH 2023-theGBJournal | Last week, the Federal Government of Nigeria (FGN) bond secondary market was bullish as the average benchmark yield for bonds declined by 8bps to close at 13.19%. Across the curve, yields declined on the 7-year bond (-3bps to 14.13%) and the 10-year bond (-15bps to 14.13%).
Elsewhere, yields on the 3-year bond expanded by 13bps to settle at 12.03%. We link the market’s performance to participation from investors who lost bids at the primary market auction on Monday.
At the FGN bond auction, the Debt Management Office (DMO) offered N360.00bn (US$777.82m) across the February 2028 (bid-to-offer: 0.8x), April 2032 (bid-to-offer: 0.3x), April 2037 (bid-to-offer: 4.0x) and April 2049 (bid-to-offer: 3.9x) maturities with most of the demand skewing to the longer-dated bonds (20-year and 30-year bonds).
Demand was slightly lower than at the last auction in February, as reflected by a total subscription of N808.6bn (N992.1bn) and a bid-to-offer ratio of 3.88x (vs 3.95x at the last auction). Consequently, the yields on the April 2032 (-15bps to 14.75%), April 2037 (-70bps to 15.20%) and April 2049 (-25bps to 15.75%) declined while the yield on the February 2028 expanded slightly by 1bp to 14.00%.
Meanwhile Coronation Research analysts say their view remains that elevated Federal Government domestic borrowing will drive yields upwards over the course of the year.
In contrast, activities at the the Treasury Bill (T-Bill) secondary market was bearish again as the average yield for T-bills rose by 44bps to 5.80%.
The yield on the 349-day T-bill closed at 8.66%. At the Tbill auction this week, the CBN is expected to roll over N145.47bn worth of bills. Elsewhere, the average yield for secondary market OMO bills expanded by 101bps to 4.02%.
