SAT 22 MAY, 2021-theGBJournal- The Treasury bonds secondary market closed the week on a bearish note, as yields adjusted to the higher stop rates at Wednesday’s FGN bond auction.
Consequently, the average yield expanded by 15bps to 12.4%. Across the benchmark curve, the average yield increased at the short (+24bps), mid (+10bps) and long (+10bps) segments following investor’s sell-offs of the JAN-2022 (+82bps), FEB-2028 (+13bps) and APR-2049 (+27bps) bonds, respectively.
At the bond auction, the DMO offered instruments worth NGN150.00 billion to investors through re-openings of the 16.2884% FGN MAR 2027 (Bid-to-offer: 0.74x; Stop rate: 13.10%), 12.5000% MAR 2035 (Bid-to-offer: 1.15x; Stop rate: 14.00%) and 14.8000% FGN APR 2049 (Bid-to-offer: 3.75x; Stop rate: 14.20%) bonds.
We note that the demand was stronger (subscription: NGN281.97 billion; bid-to-offer: 1.9x) compared to April (Subscription: NGN265.68 billion; Bid-to-offer: 1.8x). The DMO eventually allotted instruments worth NGN175.25 billion, resulting in a bid-to-cover ratio of 1.6x.
We maintain our view of higher bond yields in the short term, given the negative sentiments in the market. Nonetheless, we expect investors to cherry-pick long-dated bonds with attractive yields.