Following the regulatory measures of the monetary authority, selling pressure resulted in an increase of 97 basis points to 14.8% in the average yield on Nigerian government local bonds in the secondary market. The N418 billion that the debt management office raised in the primary market auction last week was followed by the yield adjustment.
According to a report from Cedrus Group Africa, 52,338 bonds worth N51.123 million were exchanged last week in 31 deals, as opposed to 98,426 units worth N95.304 million that were transacted in 60 deals previous week.
Following the apex bank’s request from local lenders to sell down its 24-hour foreign currency holdings, the volatility of the Nigerian financial market increased. Remember that in 2024, the debt office began holding auctions on the primary market and saw an increase in subscriptions.
Reacting to new market dynamics ahead of interest rate hike expectations, funds and asset managers adjusted swiftly with selloffs on naira assets. This shifted the yield curve and prices of government bonds nosedived.
In an update, Cordros Capital Limited told investors that the average yield advanced across the short, mid, and long segments. As a result of sell pressure, short-tenor instruments recorded a 172 basis points increase in yield and long-dated instruments saw yield surged 63 basis points.
At the belly of the curve, the yield rose by 72 basis points. The surge was propelled by profit-taking activities on the MAR-2024 (+396bps), APR-2029 (+134bps), and JUN-2038 (+223bps) bonds.
At the primary market auction conducted by the debt office, it offered instruments worth N360.00 billion to investors through re-openings of the 16.29% FGN MAR 2027, 14.55% FGN APR 2029, 14.70% FGN JUN 2033 and 15.45% FGN JUN 2038 bonds.
2027 FGN bonds recorded a bid-to-offer of 1.9x at a 15.00% spot rate, and 14.55% FGN APR 2029 achieved a bid-to-offer of 0.6x at a 15.50% spot rate. Also, 14.70% FGN JUN 2033 witnessed a bid-to-offer of 0.8x with a 16.00% stop rate, and 15.45% FGN JUN 2038 delivered a bid-to-offer of 3.5x with a stop rate of 16.50%
Traders reported that subscription level or demand was lower across the four instruments as the total subscription level settled at N604.56 billion as against N886.41 billion achieved in the previous auction. DMO allotts bonds worth N418.20 billion, translating to a bid-to-cover ratio 1.5x.
