FG reopens N100bn bond offer this week

The Debt Management Office, on behalf of the Federal Government, is expected to offer a total of N100bn for subscription on February 27, 2019.

Last week, the bullish sentiment in the bonds market was reversed amid sell-offs by investors who booked profits ahead of the bond auction scheduled to hold this week.

Consequently, the average yield across all tenors advanced by 26 points week-on-week to close at 14.2% on Friday.

Major sell-offs were recorded at the short- and medium-end of the curve, particularly the 12-Apr-19, 14-Mar-20 and 12-Apr-20 maturities.

Average yield advanced to 13.7% following sell-offs across tenors.

An inflow of N54.1bn from matured Open Market Operation bills is scheduled to hit the financial system, which will likely bolster system liquidity and drive momentum across the trading sessions.

The Treasury bills secondary market last week witnessed bearish sentiments as investors sold off their positions following the Central Bank of Nigeria’s announcement of an OMO auction on Tuesday as well as a primary market auction on Wednesday.

Major sell-offs were recorded at the shorter end of the curve, particularly the 18-Apr-19, 09-May-19 and 02-May-19 maturities.


Consequently, the average yields across all tenors advanced by 33 basis points week-on-week to settle at 13.7% on Friday from 13.3% the previous week.

At the OMO auctions conducted last week, a total of N100.0bn was offered across the 93-day and 205-day tenors. While the shorter tenor was undersubscribed with a bid-to-cover ratio of 0.9x, the 205-day was oversubscribed with a bid-to-cover ratio of 2.6x.

The CBN included the long-term bill in its offer (offered last on the 28-Feb-19) at the Thursday auction, offering a total of N250bn across the 91-day182-day and 350-day instruments.

While the short- and medium-term bills were undersubscribed, the long-term instrument was oversubscribed with a bid-to-cover ratio of 2.3x as a total of N228.4bn subscription was received against the N100.0bn offered.

At the primary market auction last Wednesday, a sustained trend in demand across the 91-day182-day and 364-day maturities was witnessed. As a result, stop rates across all three tenors declined with the apex bank fully allotting about N48.6bn across board.

Analysts at Afrinvest Securities Limited said the CBN was also expected to maintain its pace of excess liquidity mop-ups via OMO auctions, adding that it might lead to further pressure on yields.

The CBN’s Monetary Policy Committee held its second meeting for the year on Monday and will continue on Tuesday (today) to assess the recent developments in the global and domestic macroeconomic environment.

Analysts at Afrinvest said, “We expect that the MPC will maintain status quo by keeping all key policy rates at current levels in a bid to achieve the delicate balance between growth, inflation and exchange rate stability.

“Going into the week, we expect to see a flattish trading session as investors anticipate the outcome of the MPC meeting on Tuesday and more importantly the bond auction on Wednesday.

“Investors are, therefore, advised to take advantage of bonds with attractive yields and trading at a discount as well as primary offers in the FGN Bond spaces.”