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BONDS: Investors reprice FGN bonds in anticipation of increased supply as average yield expands by 46bps to 10.4%

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SAT 10 APRIL, 2021-theGBJournal- The Treasury bonds secondary market remained bearish, as investors repriced FGN bonds in anticipation of increased supply to the market, as signalled by the release of the Q2-21 FGN bond issuance calendar.

Consequently, the average yield in the space expanded by 46bps to 10.4%. Across the benchmark curve, the average yield was lower at the short (-2bps) end due to demand for the APR-2023 (-66bps) bond, while it expanded at the mid (+58bps) and long (+73bps) segments, following sell-offs of the MAR-2027 (+80bps) and APR-2049 (+127bps) bonds, respectively.

The DMO, on Tuesday, released its bond issuance calendar for the second quarter of the year, stating its intentions to raise NGN540.00 billion, translating to a NGN90.00 billion increase to what was offered in Q1-21 (NGN450.00 billion). Interestingly, the DMO intends to re-open the APR-2049 bond in May 2021.

Cordros Research analysts say they expect investors to sustain the sell-offs witnessed this week as they anticipate higher yields at the primary market, following the expected supply increase.

‘’Thus, we expect bond yields to close higher. Considering that pressure points remain that could pressure yields in the longer term, we expect yields to remain in double-digit levels on average.’’

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