Trading in the bond market last week was bearish, as high stop rates at the primary auction weigh heavily on investor sentiments.
Consequently, average yield rose by 46 basis points week-on-week to 14.54 percent.
Investors sold off at the short (+46 bps), mid (+53 bps), and long (+33 bps) ends of the curve, with the JAN2022 (+63 bps), MAR-2024 (+65 bps), and MAR-2036 (+54 bps) bonds recording significant expansions
Looking forward to the week ahead, analysts expect yields to follow the primary auction stop rate and in the medium term, a high but modest yield.
“We expect yields to take a cue from primary auction stop rates in the coming week. However, we reiterate our expectation for modestly higher yields in the medium term, anchored on domestic monetary policy direction, capital flight amid higher yields in safe-haven assets, political uncertainty stemming from the upcoming general elections, and government borrowing to fund the 2018 budget”, the currency analyst from Cordros Capital stated
At the bond auction on Wednesday, the DMO allotted a total of N39.70 billion –N3.97 billion of the APR-2023 (re-opening), N14.35 billion of the MAR-2025 (re-opening), and N21.38 billion of the FEB-2028 (re-opening) – in bonds at respective stop rates of 14.39 percent (13.69% at the previous auction), 14.60 percent (14.00% at the previous auction), and 14.69 percent (14.30% at the previous auction).
Frontpage September 9, 2020