FGN Eurobond Yields on the Decline as Bearish Sentiments Resurface…

Date:

In the just concluded week, the Debt Management
Office (DMO) sold N264.52 billion (N39.52 billion
more than its offer).

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The DMO allotted N264.52 billion worth of bonds (re-openings); viz., N45.448 billion for the 14.55% FGN APR 2029, N40.420 billion for the 12.50% FGN APR 2032, and N178.647 billion for the 16.25% FGN APR 2037.

Given the 2x subscription, especially for longer
maturities, stop rates for the 29s, 32s, and 37s fell to 14.50%, 15.00%, and 16.0%, respectively, from 14.50%, 15.00%, and 16.00%.

Despite the decline in stop rates, traders were bullish on most maturities tracked in the secondary market except for the 10-year, 16.29% FGN MAR 2027 debt, which stayed flat at 13.94%.

The 15- year 12.50% FGN MAR 2035 bond, the 20-year 16.25% FGN MAR 2037 bond and the 30-year 12.98% FGN MAR 2050 bond gained N2.27, N9.41, and N4.49, respectively; their corresponding yields fell to 14.00% (from 14.43%), 14.44% (from 16.00%), and 14.00% (from 14.72%), respectively.

The value of FGN Eurobonds traded in the international capital market depreciated for most maturities tracked as investors weighed the impact of the US Federal Reserve’s decision to hike benchmark rates by 50 bps.

Hence, the 20-year, 7.69% paper FEB 23, 2038, and the 30-year, 7.62% NOV 28, 2047, lost USD 0.28 and USD 0.29, respectively, while their corresponding yields rose to 12.26% (from 12.20%), and 12.09% (from 12.04%), respectively.

The 10-year, 6.38% JUL 12, 2023 bond gained $0.08, although its yield declined to 9.21% (from 9.25%)

In the new week, we expect local OTC bond prices to appreciate (and yields to moderate) amid bullish activity in the fixed- income space…

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