Nigeria auctioned 60 billion naira bonds on Wednesday

Lagos, Nigeria (Capital Markets in Africa):- Bond auction worth N60.0bn for the month of May held on Wednesday for the re-opening of FEB 2020, MAR 2024 and JULY 2034 instruments at N20.0bn. The short, medium and long term bonds re-opened were all oversubscribed with the total N60bn fully allotted. Relative to the auction held in April, marginal rates at the primary market auction on Wednesday fell across tenors on offer. The FEB 2020, MAR 2024 and JUL 2034 instruments were offered at marginal rates of 13.8%, 13.5% and 13.9% respectively, 60bps, 74bps and 58bps less than the marginal rates at the April auction. The moderation was majorly attributed to the lower volume of bonds offered at this month’s auction (N60.0bn relative to N70.0bn offered in April) as well as the prevailing lower risk pricing of Nigerian fixed income securities. Following the reopening, it was observed that yields on FEB 2020 and MAR 2024 instruments rose 0.5% and 0.4% to close 13.5% and 13.4% respectively while the JULY 2034 instrument declined 0.1% to 13.6% the last day.

W-o-W analysis of the Sovereign Yield curve indicates a rise in average yields in the short term benchmark bonds while average yields on the medium term instruments dropped marginally as yields on long term bonds barely changed. The rise in yields at the shorter term cannot be dissociated from the tighter liquidity in the money market consequent on CBN’s aggressive liquidity mop-up. We expect yields to moderate next week as investors may likely take advantage of the high yields of fixed income securities, especially at the lower end of the curve.