The average yield on Federal Government of Nigeria (FGN) bonds fell to 14% on Monday as the asset, fund managers, and debt management office (DMO) auction sales took place.
Nigeria’s debt office will reopen bonds with interest rates of 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 13.00% FGN JAN 2042, and 12.98% FGN MAR 2050, totaling N360.00 billion.
Simultaneously, the National Bureau of Statistics is anticipated to disclose last month’s inflation numbers. Following the Nigerian currency crisis in the first quarter of 2023, headline inflation in March increased to 22.04%. A number of fixed income securities specialists believe the outcome of the May 2023 FGN bond auction will have an impact in the secondary market
FGN bonds traded in the secondary market were essentially flat for the majority of maturities. The market was range-bound throughout the week, with investors trading carefully.
The rates on the 20-year 16.25% FGN MAR 2037 debt and the 30-year 12.98% FGN MAR 2050 bonds, in particular, remained constant at 15.23% and 15.83%, respectively. The yield on the benchmark 10-year 16.29% FGN MAR 2027 note, on the other hand, fell two basis points to 12.73% (from 12.84%).
Fixed income securities dealers indicated that the value of the 15-year 12.50% FGN MAR 2035 paper fell N1.02 as its equivalent yield increased to 14.96% from 14.75%, based on a pocket of transactions witnessed last week. According to analysts note, some market participants, fixed income securities investors cherry-picked instruments with attractive yields across the curve, particularly at the mid and long-tenor instruments.
As a result, the average yield across instruments contracted by 9 basis points to 14.0%. Across the benchmark curve, the average yield dipped on the short-end (-37bps) instruments, due to interest on the MAR-2024 (-173bps) bond. Yields however expanded on the long-end instruments, losing 3 basis points following profit-taking on the MAR-2035 (+21bps) bond. Meanwhile, the average yield was flat at the mid-segment.
Analysts gauged the temperature in the fixed income market, saying, sentiment in the secondary market was mixed despite the buoyant liquidity in the system. Most of the trading efforts were concentrated at the near and mid ends of the curve, amidst preparation for Monday’s auction exercise, TrustBanc Capital Limited said in a note.
Offer for Mar-35 (+21bps) maturity submerged bids for Mar-27 (-11bps) and Mar-25 (-2bps) papers. As a result, the average yield closed at 14.31% week-on-week, barely above last week’s 14.30%.
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