Investors Interest in FGN Bond Declines, Yield Rises to 18.8%

Date:

July 1, 2024.

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Azonuchechi Chukwu.

Investors continue search for high yield investment option has continued to trigger portfolio adjustment, rebalancing amidst the worsening inflation condition in Nigeria. Last week, the average yield on Federal Government of Nigeria (FGN) bond spiked by 23 basis points in the secondary market over sustained risk off sentiment on local borrowing instruments.

Fixed interest securities investors launched a bearish investment journey, taking their funds elsewhere in search of inflation protected return amidst subdued rate on local bonds. Reflecting investors’ apathy, the Debt Management Office’s (DMO) bonds auction was greatly under subscribed over sustained negative interest yield amidst high inflation environment.

At the primary market auction, the DMO offered instruments worth N450.00 billion to investors through re-openings of the 19.30% FGN APR 2029 bond, 18.50% FGN FEB 2031 bond, and 19.89% FGN MAY 2033 bonds.

Notably, the auction recorded weak demand as total subscription level settled at N305.26 billion with a bid-to-offer ratio of 0.7x. Eventually, the DMO allotted instruments worth N297.01 billion across the three tenors, resulting in a bid-to-cover ratio of 1.0x.

According to the auction result, 5-Year bond was sold at 19.64%, 35 basis points above previous auction rate. Also, a 7-Year FGN bond was sold at 20.19%, which was 45 basis points above previous auction rate, while 10-year bond attracted 21.50%, 161 basis points above previous auction spot rate.

In the secondary market, trading activities were bearish as investors offloaded naira assets. Overall, the local bonds market closed bearish, with the average mid-yield rising by 23 bps to 18.84%, according to AIICO Capital Limited.

Across the benchmark curve, Cordros Capital Limited said the average yield increased at the short (+6bps) and long (+1 bps) ends. The yield surge was a results of selloff activities on the MAR-2025 FGN bond, causing its yield to rise by +13 bps and JUN-2053 by +10bps bps, respectively.

However, the average yield dipped at the mid (-70bps) segment due to demand for the JUN-2033 (-155bps) bond.(www.naija247news.com).

Chukwu Azochukwu, The Naija247news
Chukwu Azochukwu, The Naija247newshttps://gravatar.com/azonuchechivchukwu
Azonuchechi Chukwu - Business Journalist at Naija247news.com Azonuchechi Chukwu is a seasoned business journalist contributing to the insightful coverage of economic and financial news at Naija247news.com. With a passion for unraveling the complexities of the business world, Azonuchechi brings a wealth of expertise and dedication to his role. As a Business Journalist, Azonuchechi specializes in providing comprehensive analyses of market trends, corporate developments, and economic indicators. His in-depth reports offer Naija247news.com readers a nuanced understanding of the forces shaping the Nigerian and global business landscapes. Azonuchechi Chukwu's commitment to journalistic excellence is evident in his ability to translate complex financial information into accessible and engaging narratives. Whether exploring stock market fluctuations, corporate strategies, or economic policies, he strives to deliver content that empowers readers with valuable insights. With an educational background in business and a keen interest in the intersection of finance and technology, Azonuchechi stays at the forefront of industry dynamics. His coverage extends beyond traditional financial reporting, encompassing the dynamic realms of fintech, entrepreneurship, and sustainable business practices. Azonuchechi Chukwu's work goes beyond the surface, aiming to foster financial literacy and awareness among Naija247news.com's audience. By demystifying economic complexities and shedding light on emerging opportunities, he plays a pivotal role in keeping readers well-informed in the fast-paced world of business. As Naija247news.com's Business Journalist, Azonuchechi Chukwu continues to make meaningful contributions to the platform's mission of delivering timely, accurate, and relevant business news to its diverse audience. His dedication to journalistic integrity and his ability to navigate the intricacies of the business realm make him an invaluable asset to the Naija247news.com team.

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