FGN Bond Stop Rates Drop Further on Demand Pressure…

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In the just concluded week, Debt Management Office (DMO) sold bonds worth N409.99 billion, viz: 5-year, 12.75% FGN APR 2023 (Re-opening) worth N29.30 billion, 10-year, 14.55% FGN APR 2029 (Re-opening) worth N106.39 billion and 30-year, 14.80% FGN APR 2049 (Re-opening) worth N274.30 billion respectively.

Amid significant demand pressure, all maturities were auctioned at lower stop rates of 9.85% (from 11.00%), 11.13% (from 12.00%) and 12.56% (from 13.00%) respectively in line with our expectation.

Similarly, values of FGN bonds traded at the over-the-counter (OTC) segment appreciated for most maturities tracked amid renewed demand pressure: the 5-year, 14.50% FGN JUL 2021 paper, the 7-year, 13.53% FGN MAR 2025 note, the 10-year,
16.29% FGN MAR 2027 debt and the 20-year, 16.25% FGN APR 2037 bond rose by N2.06, N1.10, N2.61 and N1.35 respectively; their corresponding yields increased to 7.05% (from 8.56%), 10.13% (from 10.40%), 10.75%
(from 11.21%) and 11.43% (from 11.58%) respectively.

Elsewhere, the value of FGN Eurobonds traded at the international capital market depreciated for all maturities tracked amid sustained profit taking – the 10-year, 6.75% JAN 28, 2021 note, the 20-year, 7.69% FEB 23, 2038 paper and the 30-year, 7.62% NOV 28, 2047 bond lost USD0.03, USD0.75 and USD0.52 respectively; their corresponding yields rose to 3.18% (from 3.08%), 7.55% (from 7.38%) and 7.77% (from 7.62%) respectively.

In the new week, against the backdrop of boost in financial system liquidity, we expect FGN bond prices to rise
(with corresponding decline in yields) amid expected buy pressure at the OTC market.

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