Monthly Bond market review and outlook

At the primary bond market, the August-2020 domestic bond auction received huge interest as safe investment vehicles remain limited in the country.

Notably, the auction was oversubscribed by 1.6x as bids worth N242.2billion turned up compared to N150billion on offer. Despite the huge interest, the DMO allotted only N116.7billion while allotting another N9.5billion via non-competitive bids (Total allotment – N126.2billion).

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Specifically, the DMO sold N23.8billion less than the N150billion offered, while overselling by 34percent on the longest-dated maturity to maintain their strategy of borrowing longterm for cheaper. In all, stop rates on the 2026s inched up 70bps to 6.70percent while the 2035s, 45s and 50s dropped marginally – closing at 9.35percent, 9.75percent and 9.90percent respectively.

At the secondary market, sentiments were bearish as profit-taking was the order of the month. Accordingly, average bond yield rose by 100bps month-on-month (m/m) to 7.9percent in August-2020. This month, we expect some of the sizable OMO maturity of N1.2trillion expected to hit the system to find their way to the primary as well as the secondary bond market as investors continue their search for high-yielding naira assets.

Iheanyi Nwachukwu

Iheanyi Nwachukwu, is a creative content writer with almost two decades journalism experience writing on banking, finance, capital markets, and tax. The multiple awards winning journalist is Assistant Editor, BusinessDay. Iheanyi holds BSc Degree in Economics from Imo State University; Master of Science (MSc) Degree in Management from University of Lagos. Iheanyi has attended several work-related trainings including (i) Advanced Writing and Reporting Skills (Pan African University, Lagos); (ii) News Agency Journalism (Indian Institute of Mass Communication {IIMC}, New Delhi, India); and (iii) Capital Markets Development and Regulations (International Law Institute {ILI} of Georgetown University, Washington DC, USA). Other trainings Iheanyi attended include: Economic/Political Risk Analysis (By Thomson Reuters Foundation); International Financial Journalism (IFJ) (By PMA Media Training, UK); Effective Business Writing Skills (By Phillips Consulting); Reporting on Corporate Governance (By International Finance Corporation (IFC) & Thomson Reuters Foundation UK); etc. In addition, he has participated in high-level economy & markets events in Dubai, South Africa, Morocco, and other African countries like Zambia, Ghana and Gambia.