Following a fully subscribed primary market bond auction held by the Debt Management Office -DMO, the average yield on the Federal Government of Nigeria (FGN) bond falls by 11 basis points to 13.2% in the secondary market.
Following robust liquidity in the banking system, investors moved their focus to the secondary market to acquire debt instruments, resulting in the reported rise throughout Nigeria’s bonds.
Cordros Capital dealers said that the average yield declined throughout the benchmark curve at the short (-9bps), mid (-19bps), and long (-5bps) segments. Investors requested the JAN-2026 (-30bps), APR-2029 (-26bps), and APR-2049 (-20bps) bonds, according to market experts.
On Monday, DMO launched its monthly auction of FGN Bonds, offering N360 billion in subscriptions. The auction result, however, revealed that DMO generated N662.6 billion by reopening the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 16.25% FGN APR 2037, and 14.80% APR 2049 FGN bonds.
The participation level at this auction increased month on month, with the DMO securing a total offer of N805.2 billion compared to a total bid of N532.2 billion at last month’s auction, according to Coronation Research.
According to previous auction results, participation was the most in ten months, according to a plethora of industry specialists. The 5-Year FGN Bond received bids at 14%, while the 9-Year received a spot rate of 14.90 against 14.60% in the previous action.
Also, the 15-year FGN Bond spot rate was 15.80% and 27-year benchmarks were allotted at the marginal rates of 15.90%T. The demand at this auction largely reflects improved system liquidity, according to analysts’ notes.
In a market brief, Coronation Research pinpointed that demand was driven by improved system liquidity as N650 billion FAAC inflows hit the financial system.
“We note that market liquidity stood at N1.2 trillion on Friday while call, overnight and repo rates closed within a range of 5% – 12% reflecting improved system liquidity”, Coronation added.
According to the latest monthly report by National Pension Commission (PENCOM), FGN bonds held by pension fund administrators as at end of December ’22 increased by 10.7% to N9.2 trillion from N9.0trn recorded in the corresponding period of 2021.
The PENCOM report shows that FGN bonds accounted for 61.5% of total assets under management (AUM). Furthermore, the DMO is set to raise a maximum of N1.2 trillion in Q1-2023 through FGN bonds.
However, Nigeria’s debt agency raised N662.6bn in January which accounts for 54% of the target. Analysts said the DMO could exceed its borrowing target for FGN bonds at the end of Q1-2023.
