Debt Management Office DMO, to open N260bn Nigeria Bonds for subscriptions

Debt Management Office (DMO) will conduct its monthly Federal Government Bond (FGN) auction on Monday with two reopening instruments with 5- and 7-year tenors on offer. At the primary market auction, local bonds worth N260.0 billion would be on offer across two tenor buckets. The authority will reopen two sovereign issues across 5-year and 7-year tenors for investors’ subscription with N130 billion offer size for each. There is mixed reactions about subscription levels amidst anticipated spot rates repricing.  At the previous bonds auction for Sept, DMO slashed spot rate on 5-year bonds to 16% from 17.945%, reflecting interest rate condition in Nigerian markets. The spot rate for 7-year FGN bonds was reduced to 16.20% at the previous auction conducted in September, from 18% – the same time when the Central Bank axed monetary policy rate by 50 basis points.
For Oct action, analysts expect demand to remain solid but MarketForces Africa noted diverge views on spot rates pricing for the local bonds. The fixed income market has come under intense pressures as macroeconomic indicators improved.  The monetary policy dovish tone suggests rates on fixed income securities will reduce in the fourth quarter. And yields across the short, belly and long end of the curve have maintained downward trend as some wealth managers, investors locked in positions. Ahead of the October auction sales, the market expects the yield swing to guide performance in the secondary market segment next week.
“FGN Bonds won’t be exempted from the recent curve retracement post OMO issuances at higher levels to support the curve in recent weeks despite favourable inflation print. We expect stop rates in at slightly higher levels to the secondary levels”, AAG Capital Limited said in an update. The Nigerian secondary bond market closed on a bullish note last week, buoyed by strong investor demand across most tenor segments.
Trading activity remained robust, reflecting improved sentiment and sustained appetite for fixed-income instruments amid persistent uncertainties in other asset classes. Consequently, the broad-based demand exerted mild downward pressure on yields, driving the average yield lower by 10 basis points to 15.87% for the week.