Rates Spike as Nigeria Raises N369bn from Bonds Sales

The Federal Government of Nigeria (FGN) raised N369 billion from the local debt capital market from fresh bond auction sales. The detail showed that auctioned bonds attracted mixed spot rates, though investors show a preference for longer-dated securities.

Nairalaw.com reported that Debt Management Office (DMO) on Monday conducted a primary market auction where it planned to raise N360 billion as part of efforts to close 2023 budget deficit.

Making demand for increase returns on securities offering, investors have started to price double-digit inflation rate, a high interest rate environment in naira assets across the local debt capital market segment.

The market has witnessed negative real return on naira assets throughout the first quarter as the consumer price index accelerated and fund managers told Nairalaw.com that the condition was worsened by a persistent decline in the value of naira – all having negative impacts on portfolio returns.

However, the auction results showed that the DMO raised ₦368.67 billion against the ₦360 billion offered to local investors in the debt capital market. Consequently, in the secondary market, the FGN Bond market traded on a quiet note, as market players shifted attention to DMO’s auction sales.

The detailed result shows that subscription levels on Feb-28 and Apr-32 were significantly low as expected amidst tight liquidity and inflation-exposed returns in the fixed income market.

On the other hand, analysts said the newly replaced Jan-42 and Mar-50 maturities were oversubscribed amidst changing market dynamics. DMO auction result showed that stop rates closed flat on Feb-28 offer.

Meanwhile, the spot rate for Apr-37 bond was allotted at 14.80%, 50 basis points above the previous record.  According to TrustBanc Capital Limited, the Jan-42 and Mar-50 FGN Bonds maturities made their debut stop yields at 15.4% and 15.8%, respectively.

The 10-year, 15-year, 20-year, and 30-year FGN bond yields remained stable at 13.49%, 14.75%, 15.40%, and 15.60%, respectively, Cowry Asset Management noted in its market note.

Following a quiet transaction record in the secondary market for Nigeria bonds, traders said the average benchmark yield held firm at 14.33%.  TrustBanc Capital analysts said in a note that at the Eurobond segment, profit takers were vocal across the benchmark curve, leaving their signature on all benchmark securities.

“We expect foreign portfolio investors (FPIs) to stay overweight on the Nigerian curve in the immediate, barring unexpected shocks on the international front”, TrustBanc said. The average yield on Eurobond climbed by 6 basis points to 12.94%.

Elsewhere, the 10-year US Treasury yield advanced by 7 basis points to close at 3.52%. #Rates Spike as Nigeria Raises N369bn from Bonds Sales Naira Lost 11% as Banks Issue New Update on FX Spending
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