FGN Bonds Market Update: Bearish Trend Persists into Second Consecutive Week

This week, the bonds market traded on slightly bearish sentiments as investors traded cautiously due to the postponed elections and in anticipation of the bond auction which held on Wednesday. Consequently, average yield across tenors inched northwards by 4bps to 15.0% from 15.1% recorded the previous week following sustained sell pressures on the 16-Aug-19 (-68bps W-o-W) and 20-Sep-19 (-62bps W-o-W) maturities.

At the Bond auction which held on Wednesday, the Debt Management Office (“DMO”) offered a total of N150.0bn across the 5-, 7- and 10-year bonds (N50.0bn apiece). The total offer had a bid-to-cover ratio of 1.6x following the oversubscription of the 10-year bond (total subscription of N196.0bn) while the short- and medium-term offers witnessed low demand with a subscription of N9.5bn and N28.9bn respectively. Please see details below:

12.75% FGN APR 2023 13.53% FGN MAR 2025 13.98% FGN FEB 2028
Auction Date: 20-Feb-19 20-Feb-19 20-Feb-19
Tenors: 5-Year 7-Year 10-Year
Term-To-Maturity: 4 Years, 2 Months 6 Years, 1 Month 9 Years
Amount Offered: N50.00bn N50.00bn N50.00bn
Subscription: N9.52bn N28.85bn N195.98bn
Amount Allotted: N1.5bn N12.25bn N136.25bn
Range of Bids: 14.5000% – 16.0000% 14.2000% – 16.3000% 13.0000% – 16.0000%
Stop Rates: 14.5200% 14.7999% 14.9390%
Previous Stop Rates: 15.2000% 15.2500% 15.3500%
Bid to Cover Ratio: 0.2x 0.6x 3.9x
Allotment Ratio: 0.2x 0.4x 0.7x

Going into the week, we anticipate that there will be a reversal of this bearish trend as we expect coupon payments worth N26.3bn to improve demand levels and advise investors to take advantage of the attractive yields on the 2020s maturities.

Please see indicative FGN bond rates below:

Bond Tenor (Years) Yield (%) Coupon (%) Implied Price (N)
Feb-20 1            14.40              15.54                    100.98
Jul-21 2            14.48              14.50                    100.00
Jan-22 3            14.45              16.39                    104.46
Mar-24 5            14.30              14.20                      99.63
Jan-26 7            14.40              12.50                      91.82
Mar-27 8            14.45              16.29                    108.57
Feb-28 9            14.56              13.98                      92.03
Jul-34 15            14.16              12.15                      87.50
Mar-36 17            14.10              12.40                      89.10
Apr-37 18            14.09              16.25                    113.98

Rates are valid till 01:45pm today (25-Feb-2019)
*Please note that the minimum subscription for Bonds is N20,000,000.00

To invest in FGN Bonds or T-Bills, send an email to – brokerageteam@afrinvest.com

 

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