Domestic bond market close flat this week

 

The performance of the domestic bond market was largely flattish this week as average yield across tenors closed at a similar level to prior week. Yields fell by a marginal 2 basis points week-o-week to close at 13.5 percent. On Wednesday, the DMO held its monthly Bond Primary Market Auction (PMA). At the auction, the 5-year 14.5 percent JUL 2021 and 10-year 13.98 percent FEB 2028 bonds were reopened while a near 10-year 13.53 percent MAR 2025 bond was offered.
In line with expectation, demand for the longer dated 10-year instrument was stronger in anticipation of further moderation in the interest rate environment. The 10-year 13.98 percent FEB 2028 instrument received the highest subscription, 3.3x the amount offered (amount offered: N30.0 billion, subscribed: N98.8 billion, alloyed: N10.0 billion and marginal rate: 13.6 percent). Investor sentiment towards the 5-year 14.5 percent JUL 2021 instrument was also positive with a subscription of 1.9x (amount offered: N10.0 billion, subscribed: N18.9 billion, allotted: N10.1 billion and marginal rate: 13.4 percent). However, the 7-year new issue which was allotted at a marginal rate of 13.5 percent was undersubscribed as the total subscription of N25.2 billion was below N30.0 billion offered. Marginal rates of the 5-Year and 10-Year bonds were 30 basis points and 38 basis points lower than February auction.
Performance of Sub Saharan Africa Sovereign Eurobonds was largely bearish as yield on 20 of 22 instruments under our watch advanced week-o-week. This was against the backdrop of global risk off trades which led to a rout in emerging market assets as well as US Fed guidance on possible acceleration of pace of monetary policy tightening. If the Fed moves faster than expected in normalizing monetary policy, we expect further repricing of SSA frontier FCY bonds.
Performance of Nigerian Corporate Eurobonds was equally bearish as yield across 11 of 12 instruments advanced week-o-week with FBN Holdings 2022 recording the most sell offs (YTM rose 40 basis points to 9.2 percent). The best performing instruments year to date are Diamond 2019 and FBN Holdings 2021, up 3.9 percent and 3.1 percent year to date respectively.