At Monday’s primary market auction, the Debt Management Office provided higher spot rates on government bonds. Due to the spike in inflation and the high interest rate environment, investors have been seeking greater rates on borrowing instruments.
The Statistics Office reports that in February 2024, the rate of inflation increased to 31.7%. To prevent future increases in the consumer price index, the monetary policy authority raised interest rates by 4%.
When asked about the prognosis for the fixed income market in the first half of 2024, analysts told MarketForces Africa that it makes sense to pay more for debt instruments because of the shifting dynamics of the market.
The yield on assets holding fixed-interest securities has been high, and both a recent increase in headline inflation and benchmark interest rate could drive further yield repricing, some analysts projected, saying rates have not peaked.
At the bond auction, the DMO offered N459 billion across the standard maturities, which was met by a bid-to-offer ratio of 1.37x and a bid-to-cover ratio of 1.01x, CardinalStone Partners said in its market update.
The debt office offered N150 billion worth of 3-year bonds. The office allotted N151.928 billion versus a total subscription of N264.628 billion from market participants.
Its 7-year bonds were undersubscribed significantly, according to the auction results. The debt office offered N150 billion worth of 7-year bonds to investors but allotted N47.886 billion from a subscription of N51.786 billion received.
10-year FGN bonds received the highest subscription. The DMO offered N150 billion in bonds to investors. However, it received N298.60 billion subscription on the tenor and allotted N275.85 billion. Non-competitive allotment settled at N113.200 billion.
Auction results showed that the stop rate on the newly issued MAR-2027 bond closed at 19.94%, while the marginal rates on the reopened FEB-31 and FEB-34 papers rose by 1.50% and 1.45% to close at 20.00% and 20.45%, respectively.
Traders said it was a quiet day at the bond market as the average yield remained unchanged at 18.12% despite selloffs observed at the short end of the curve, particularly the Mar-25 (+4bps).
“Successful bids for the 19.94% FGN MAR 2027 (New Issue, 3-Year Bond); 18.50% FGN FEB 2031 (Re-opening, 7-Year Bond) & 19.00% FGN FEB 2034 (Re-opening, 10-Year Bond) were allotted at the Marginal Rates of 19.94%; 20.00% and 20.45%, respectively.
“However. the original coupon rates of 18.50% for the 18.50% FGN FEB 2031 and 19.00% for the 19.00% FGN FEB 2034 will be maintained”, DMO said in its auction results.
