SAT MAY 03 2025-theGBJournal| The FGN bond yields jumped on Friday as market participants sold off short-dated bonds, further reflecting investors’ cautious bias for duration exposure.
The average yield expanded by 2bps to 19.0%, and across the benchmark curve, the average yield increased at the short (+14bps) end, driven by selloffs of the JAN-2026 (+56bps) bond, while it decreased at the mid (-3bps) and long (-1bp) segments, following demand for the FEB-2031 (-15bps) and JUN-2053 (-11bps) bonds, respectively.
At Monday’s PMA, the Debt Management Office (DMO) offered instruments worth N350.00 billion to investors through re-openings of the 19.30% FGN APR 2029 (Bid-to-offer: 0.2x; Stop rate: 19.00%) and 18.50% FGN MAY 2033 (Bid-to-offer: 3.0x; Stop rate: 19.99%) bonds.
Total subscription level settled at N495.95 billion (previous: N530.31 billion), with a bid-to-offer ratio of 1.4x (previous: 1.8x).
Eventually, the DMO allotted instruments worth N397.89 billion (non-competitive: N123.00 billion) across the two tenors, resulting in a bid-to-cover ratio of 1.3x.
Over the medium term, Cordros Research say they expect a moderation in bond yields, influenced by two factors – the anticipated dovish monetary policy stance and demand and supply dynamics.
Meanwhile, the overnight (OVN) rate declined by 4bps w/w to 26.8%, as FGN bond coupon inflows (N259.96 billion) and banks’ activities at the SDF window (N4.94 trillion) offset debits for the FGN bond PMA (N397.89 billion).
Consequently, the average system liquidity remained robust, settling at a net long position of N1.36 trillion (vs a net long position of N1.78 trillion in the previous week).
In the absence of liquidity management measures by the CBN, we expect inflows from OMO maturities (N239.15 billion) to further boost system liquidity, causing a decline in the OVN rate.
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