SAT 24 APRIL, 2021-theGBJournal- Trading in the Treasury bonds secondary market was bearish, as yields adjusted to the higher stop rates at Wednesday’s FGN bond auction. Consequently, the average yield expanded by 20bps to 11.6%.
Across the benchmark curve, average yield expanded at the short (+6bps), mid (+32bps) and long (+11bps) segments, following sell-offs of the JUL-2021 (+47bps), NOV-2029 (+54bps) and JUL-2034 (+50bps) bonds, respectively.
At the auction, the DMO offered instruments worth NGN150.00 billion to investors through re-openings of the 16.2884% FGN MAR 2027 (Bid-to-offer: 0.69x; Stop rate: 12.25%), 12.50% MAR 2035 (Bid-to-offer: 1.12x; Stop rate: 13.34%) and 9.80% FGN JUL 2045 (Bid-to-offer: 3.50x; Stop rate: 13.85%).
We note that the demand was weaker (subscription: NGN265.68 billion; bid-to-offer: 1.8x) compared to March (Subscription: NGN333.48 billion; Bid-to-offer: 2.2x). Conclusively, the DMO allotted NGN157.95 billion, and issued an additional NGN116.50 billion as non-competitive allotment, bringing the total sales to NGN274.45 billion.
We expect improved liquidity and in turn, higher demand in the bonds secondary market, following coupon payments on the APR-2023, APR-2029 and APR-2049 bonds. Thus, we expect yields to decline from current levels in the week ahead.
We maintain our stance on continued uptick in yields, as the DMO’s intention to securitize the Ways and Means balance portends more supply of domestic debt instruments.