Treasury Bills Yield Falls as DMO Sells FGN Bonds

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Treasury Bills Yield Falls as DMO Sells FGN Bonds
Patience Oniha, DMO DG

Treasury Bills Yield Falls as DMO Sells FGN Bonds

The average yield on Treasury Bills falls on Monday as Debt Management Office (DMO) sells Federal Government of Nigeria (FGN) reopening bonds. The auction which was heavily oversubscribed closed with rates adjustment amidst a new interest rate environment.

On Monday, Nigeria’s debt agency offered N75 billion in reopening bonds across 13.53% FGN MAR 2025, 12.50% FGN APR 2032 13.00% FGN JAN 2042. Total subscriptions were ₦132.60 billion, ₦84.32 billion and ₦335.44 billion.

DMO Auction result indicates that successful bids for the 13.53% FGN MAR 2025 10-Year Bond, 12.50% FGN APR 2032 10-Year Bond and 13.00% FGN JAN 2042 20-Year Bond were allotted at the marginal rates of 10.1000%, 12.5000% and 13.1500%, respectively.

The agency allotted ₦79.59 billion, ₦39.91 billion and ₦106.62 billion. In the money market, short-term rates were relatively steady due to sizeable liquidity in the financial system.

Data from FMDQ Exchange indicates that the overnight lending rate was unchanged at 14.0%. Cordros capital attributes the steady rates to the absence of significant funding pressure on the system. Trading activities in the Treasury bills secondary market were bullish, as the average yield contracted by 2 basis points to 4.6%.

Across the curve, traders said the average yield declined at the short (-2bps), mid (-5bps) and long (-1bp) segments as investors demanded the 66-day to maturity (-8bps), 157-day to maturity (-38bps) and 220-day to maturity (-7bps) bills, respectively.

Elsewhere, the average yield expanded by 3bps to 4.6% in the open market operations (OMO bills) segment. In the secondary market, trading activities on FGN Bonds were mixed, although with a bearish tilt, as the average yield expanded slightly by a basis point to 11.1%.

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Cordros Capital stated that across the benchmark curve, the average yield closed flat at the short end but expanded at the mid (+4bps) and long (+1bp) segments as investors sold off the JUL-2030 (+5bps) and MAR-2050 (+3bps) bonds, respectively.

MarketForces Africa reported that the Federal Government of Nigeria (FGN), through the Debt Management Office, will be conducting a Primary Market Bond Auction on Monday, 20th June 2022.

At the last Primary Market Auction (PMA) held in May 2022, demand for instruments on offer was strong as opposed to the previous auction as subscriptions increased across the trio instruments. READ: CBN Sells N50 Bln OMO Bills at 7%, 8.5% and 10.10%

The total subscription at the auction was 40.60% higher than the prior auction of N575.63 billion higher than N409.41 billion in April.

Also, the high subscription level propped the DMO to raise N345.26 billion – 1.53x the amount offered. Thus, increased allotment at the May PMA led to a lower bid to cover ratio of 1.67x from 1.86x at the April PMA. Particularly for the Jan 2042 instrument. #Treasury Bills Yield Falls as DMO Sells FGN Bonds

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