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Bond Yields Rise Amid Sustained Bullish Trend



Bond Yields Rise Amid Sustained Bullish Trend

In the just concluded week, values of federal government of Nigeria (FGN) bonds traded at the over-the-counter (OTC) segment appreciated for all maturities amid demand pressure.

Specifically, the 10-year 16.29% FGN MAR 2027, the 20-year 16.25% FGN APR 2037, and the 30-year 12.98% FGN MAR 2050 debts rose by N1.86, N2.26, and N1.14, respectively.

Also, their corresponding yields contracted to 12.36% (from 12.93%), 15.35% (from 15.73%), and 15.00% (from 15.20%), respectively.

However, the yield on the 15-year 12.50% FGN MAR 2035 stayed unchanged at 14.68% at the end of the week.

Elsewhere, the value of FGN Eurobonds traded on the international capital market depreciated for all maturities due to sustained bearish activity.

Precisely, the 10-year 6.38% JUL 12 2023, the 20-year 7.69% FEB 23 2038, and the 30-year 7.62% NOV 28 2047 lost USD 0.16, USD 1.20, and USD 1.18, while their corresponding yields expanded to 13.31% (from 12.46%), 12.51% (from 12.27%), and 12.11% (from 11.89%), respectively.

“We note that traders’ sentiment will be shaped by the T-bill auction result over the course of the new week. Cowry Research anticipates the 364-day T-bill rate to rise, hence we expect local OTC bond prices to decrease (and yields to increase) in the coming week,” analysts at Cowry Research.

Treasury bills

Similarly, the Treasury bills secondary market closed on a bullish note last week, as the average yield across all instruments dipped by 37bps to 3.6%.

Investment experts at Cordros Research attributed this performance to participants’ looking to compensate for unmet demand at the NTB Primary market, amid quiet activity in the OMO segment of the market.

Across the segments, the average yield contracted by 39bps to 3.6% in the NTB segment, but remained flat at 3.0% in the OMO secondary market.

At the NTB primary auction, the CBN offered to participants instruments worth N224.50 billion – N1.03 billion of the 91-day, N10.55 billion of the 182-day, and N212.92 billion of the 364-day bills.

The auction was keenly contested with a total subscription of N906.21 trillion (bid-to-offer: 4.0x) with more demand skewed towards the longer-dated bill (N890.55 billion translating to 98.3% of the total subscription).

Eventually, the CBN allotted bills worth N324.50 billion – N1.03 billion of the 91-day, N10.55 billion of the 182-day, and N312.92 billion of the 364-day – at respective stop rates of 1.44% (previously: 3.00%), 6.00% (previously: 3.24%), and 10.00% (previously: 9.90%).

“In the coming week, we anticipate an upward tilt in T-bills yield, following our expectation of a lower system liquidity. Nonetheless, we expect market focus to be shifted to the NTB PMA holding on Wednesday (15 March), where the CBN is scheduled to roll over NGN161.87 billion worth of bills,” Cordros Research analysts said.

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