June 2021 FGN Bond Auction Review: Rates Party Coming to a Close?

Proshare

Thursday, June 24, 2021 / 10:46 AM  / By United Capital Research / Header Image Credit: DMO


Yesterday, the Debt Management Office (DMO) conducted an FGN bond Primary Market Auction (PMA) with the following instruments on offer; 16.2884% FGN MAR 2027 N50.0bn, 12.5000% FGN MAR 2035 N50.0bn and 12.9800% FGN MAR 2050 N50.0bn. As expected, investor demand remained strong as the 2027, 2035 and 2050 instruments were oversubscribed by 1.3x, 2.6x and 4.5x, respectively.

Marginal rates for the 2027 and 2035 instruments were reduced by 36bps and 50bps, respectively to close at 12.7% and 13.5%, from 13.1% and 14.0% at the May auction. Meanwhile, the newly introduced offering, 2050 instruments, closed at 13.7%. Compared to the marginal rate of the 2045s at the last auction, it declined by 50bps. Interestingly, the DMO sold 2.8x (N325.8bn sold vs N150.0bn offered) of what it initially offered, taking advantage of the huge bids from investors at the auction.
 
Yesterday's auction lends further credence to our position that the upward yield reversal in the fixed income market has plateaued. This is consistent with the results of the NTB auction last week and the most recent MPC meeting. In subsequent trading sessions, we expect to observe some buy interest in the secondary bond market as residual demand is met. We also think that yesterday's auction will set the tone for secondary market activity (bonds & NTB) this week and upcoming primary market auctions.

 

Lastly, regarding the equity market, we reiterate that the recent halt in the yield environment in the primary market coupled with potential dividend plays during the H1 earnings season could provide some temporary respite for the market. That said, we do not expect the equities market to stage a sustained rebound similar to 2020's performance. 


Proshare Nigeria Pvt. Ltd.


Related News

  1. Summary of FGN Bond Auction Results for June 2021
  2. DMO Sells N330bn Worth of FGN Bonds on the Back of a Strong FGN Bond Auction Demand
  3. FG, Corporates Raised N4.58trn from the Fixed Income Market as of June 3rd, 2021 - NGX
  4. ETI Opens the Market at the LSE after Successfully Listing its US$350m Sustainability Bond
  5. System Liquidity Rolls Back into Negative as Banks Opens Fresh REPO With CBN
  6. Ahead of Next FGN Bond Auction Scheduled for 23rd June 2021
  7. A Tad Bearish Day in The FGN Bonds Market Ahead of the June 2021 FGN Bond Auction
  8. Slight Pullback in FGN Bond Yields as Demand Pressure Subsides
  9. Lafarge Africa Announces the Redemption of Its Matured N33.6bn Bond Due June 15, 2021
  10. Unexpected Crash in FGN Bond Yields Triggered by Short Covering from Market Participants
  11. Invest in FGN Monthly Bond Auction - June 2021
  12. Standard Chartered Acts as Lead Manager in the ETI US$350m Tier 2 Sustainability Notes
  13. Local Markets Resume from The Holidays with A Whimper, Eurobonds Risk-Off Ahead of US FED Meeting
  14. Commercial Paper Issuance by Corporates to Increase in H2, 2021
  15. Ecobank Transnational Incorporated Launches US$350m 10NC5 Year Tier 2 Sustainability Notes
  16. CBN Advertises List of Investors with Unclaimed Interest and Redemption Proceeds on FGN Bonds

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP