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Nigeria’s bonds yields jump after DMO oversold debt instruments

THE average yield on the Federal Government of Nigeria’s bonds spiked amidst rallies in the local debt capital market after Debt Office raised about N771 billion via reopening.

According to fixed income securities traders, activities ended on a bearish note as investors showed apathy to instruments in the bond space in reaction to the higher-than-expected inflation reading.

Accordingly, the average yield inched higher by 19bps to 13.3%. Across the benchmark curve, Cordros Capital told investors that the average yield expanded across the short (+57bps), mid (+5bps), and long (+2bps) segments.

The upward shift in the yield curve occurred as investors sold off the APR-2023 (+248bps), APR-2032 (+2bps), and JUL-2034 (+16bps) bonds, respectively. 

Nigeria’s debt office offered instruments worth N360.00 billion to investors through re-openings. Demand was higher across the four instruments as the total subscription level settled higher at N993.10 billion. DMO allotted bonds worth N770.56 billion.

The reopening bonds sold at the auction were split as: N257.41 billion for the 13.98% FGN FEB 2028, N51.12 billion for the 12.50% FGN APR 2032, N220.56 billion for the 16.25% FGN APR 2037, and N241.47 billion for the 14.80% FGN APR 2049. 

Auction results were mixed as stop rates rose for most maturities except for the FGN Bond 2032, which stood flat at 14.90%, and the FGN bond 2028, which fell marginally to 13.99%. 

Traders at Cowry Asset Management told clients that the FGN bond 2037 and FGN Bond 2049 stop rates rose to 15.90% (from 15.80%) and 16.00% (from 15.90%), respectively. In the secondary, the 10-year 16.29% FGN MAR 2027 and the 30-year 12.98% FGN MAR 2050 debts declined by N0.34 and N0.03, respectively.

Traders said the debt papers’ corresponding yields expanded to 13.20% (from 13.10%), and 15.26% (from 15.25%), respectively.  However, the yield on the 15-year 12.50% FGN MAR 2035 note stayed flat at 14.80%.

Meanwhile, the 20-year 16.25% FGN APR 2037 paper gained N0.07 over increased demand, and its associated yield dropped to 15.88% (from 15.89%). Elsewhere, the value of FGN Eurobonds traded on the international capital market depreciated for all maturities tracked due to sustained bearish activity, according to Cowry Asset.

Specifically, 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 $0.03, $0.15, and $0.20, traders said. The Eurobond corresponding yields then rose to 11.76% (from 11.40%), 12.39% (from 12.35%), and 12.05% (from 12.01%), respectively.

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