FGN Eurobond Yield Rises as Demand Spikes, Sell Pressure Hits OMO Bills
The average yield on the Federal Government of Nigeria (FGN) Eurobond rises following buying interests across the sovereign curve. Due to increased demand, the average yield dropped by 12 basis points to close at 7.10 per cent.
Amidst cold trading temperature in the fixed income space, activities on Treasury bills was muted again but there was selling pressure on short-dated OMO Bills.
Debt Management Office (DMO) primary market auction results showed there was a healthy demand for Federal Government of Nigeria bonds yesterday.
In its bond auction result, the local bond was oversubscribed by 117 per cent due to healthy investor demand, with bid-to-cover ratios for 10-year and new 20-year bonds settling at 1.48x and 2.85x, respectively.
DMO raised ₦170.64 billion from FGN bonds across the 10-year with a total allotment of ₦81.72 billion for re-openings while ₦88.92 billion was raised from its new 20-year tenors.
However, the FGN bond auction result shows that spot rates on 10-year instruments slow down 15 basis points to 11.50 per cent as the 20-year note was priced at 13.00 per cent.
Today, the average interbank rate dropped by 213 basis points to close at 11.25%, following contraction at both the Open Buy Back and Overnight rate, according to Alpha Morgan Capital.
The slowdown in money market rates was due to relatively healthy liquidity in the financial system. Data from FMDQ Exchange shows that the overnight lending rate nosedived by 200 or two per cent to close at 11.50 per cent as against the last close of 13.50 per cent.
Also, the Open Repo rate plunged by 225 basis points or 2.25 per cent to close at 11.00 per cent compared to 13.25 per cent on the previous day.
Again, the Nigerian Treasury Bills secondary market closed on a flattish note with the average yield across the curve remaining unchanged at 4.54 per cent, the range it has sustained in a week.
According to a note from FSDH Capital, the average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.50 per cent, 4.11 per cent, and 5.21 per cent, respectively.
Meanwhile, the average yield across the open market operations (OMO Bills) curve increased by 6 basis points to close at 5.67 per cent as against the last close of 5.61 per cent.
Average yield across the long-term maturities expanded by 12 basis points. However, the average yield across the short-term maturities remained unchanged at 5.51 per cent.
OMO 16-Aug-22 (+24 bps) maturity bill witnessed selling pressure, according to FSDH Capital market report. After heavy demand at the auction, FGN bonds secondary market closed on a flat note today as the average bond yield across the curve closed flat at 11.79 per cent.
Analysts notes show that average yield across the short tenor of the curve declined by 1 basis point, while the average yield across the long tenor of the curve increased by 1 basis point.
However, the average yield across the medium tenor of the curve remained unchanged, according to analysts’ notes reviewed by NAIRALAW.COM.
The 27-APR-2023 maturity bond was the best performer with a decrease in the yield of 3 bps, FSDH Capital stated while the 27-MAR-2050 maturity bond was the worst performer with an increase in the yield of 5 basis points.
Read: Yields on Fixed Interest Securities Rise Amidst Liquidity Pressures
Elsewhere, activities at the FGN Eurobond market sustained a bullish stance, following buying interests across the sovereign curve. Consequently, the average yield dropped by 12 basis points to close at 7.10 per cent, according to Alpha Morgan Capital.
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