In line with market expectation of continued uptick in the yield environment of the sovereign bonds market, marginal rates across the 2025s, 2032s, and 2042s climbed 1.5ppts, 50bps, and 25bps, to print at 12.5%, 13.5% and 14.0%, respectively, with investors retaining standoffish sentiments in a bid to drive yields further upwards , amidst a generally illiquid financial system. That said, a blend of inflation expectations, climbing interest rates in the fixed income market, and political risks as we approach the electioneering season, remained the significant driving factors of investors standoffish stance in August’s auction.

Going forward into subsequent auctions, we expect marginal rates to retain current ascent, as we believe investors will remain standoff-ish. To attract fund managers’ interest, the DMO will most likely succumb to higher rates on all subsequent offerings. Also, we maintain that the hawkish stance of the CBN in its last two (2) MPC meetings, hiking MPR by a total of 250bps will continue to drive investors’ appetite for higher rates for their funds. Also, we maintain that a blend of the not-so-significant expected coupon payment of N66.8bn in August, and the FG’s persistent need to rely on the domestic market to fund its fiscal imbalance, as the external debt market conditions remain unfavourable, will further shove pricing power away from the FGN/DMO and into the hands of the private sector asset managers.