SAT DEC 14 2024-theGBJournal| The Treasury bills secondary market traded with bullish sentiments this week as the average yield across all instruments declined by 5bps to 26.3%.
Analysts attribute the performance to participants looking to fill unmet bids at this week’s NTB PMA.
Across the market segments, the average yield dipped by 2bps to 25.7% in the NTB segment and decreased by 9bps to 27.2% in the OMO segment.
At Wednesday’s NTB auction, the Debt Management Office (DMO) offered N275.71 billion – N10.84 billion for the 91D, N8.36 billion for the 182D and N256.51 billion for the 364D bills – worth of instruments to investors.
Aggregate subscription settled significantly lower at NGN907.85 billion (bid-to-offer: 3.3x), compared to the previous auction (NGN2.55 trillion | bid-to-offer: 4.4x).
Eventually, the DMO allotted NGN527.84 billion – NGN8.80 billion for the 91D, NGN7.03 billion for the 182D and N512.00 billion for the 364D papers – at respective stop rates of 18.00% (unchanged), 18.50% (unchanged) and 22.80% (previous: 22.93%).
Also, the Central Bank of Nigeria (CBN) conducted an OMO auction on Monday, offering instruments worth N600.00 billion – N300.00 billion for the 351D and N300.00 billion for the 365D – to investors.
Total subscription settled at N1.56 trillion (bid-to-offer: 2.6x), with the CBN allotting exactly what was demanded for the 351D and 361D bills at respective stop rates of 23.95% (previous: 24.28%) and 23.98% (previous: 24.28%).
We believe the subdued system liquidity next week will undermine demand for instruments in the T-bills secondary market, causing yields to expand.
Meanwhile, in line with our expectations, the FGN bond secondary market experienced minimal activity for most of the week as the average yield increased by 4bps to 19.5%.
Across the benchmark curve, the average yield expanded at the short (+2bps), mid (+8bps), and long (+4bps) segments, driven by selloffs of the JAN-2026 (+13bps), JUN-2033 (+31bps), and APR-2037 (+37bps), bonds.
Next week, we believe the direction of yields in the secondary market will be shaped by the outcome of this month’s FGN bond auction holding on Monday (16 December).
At the auction, the DMO is set to offer instruments worth N200 billion through re-openings of the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031 bonds.
Meanwhile, we also maintain our short-term expectation of elevated yields, consequent on anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics.
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