SAT, 24 OCT, 2020-theGBJournal-Activities in the Treasury bills secondary market remained strong, as the buoyant system liquidity and retail demand sustained active trading in the market. Consequently, the average yield across all instruments contracted by 72bps to 0.5%.
Across the segments, the aforementioned factors drove down yields significantly at the OMO (average yield contracted by 73bps to 0.5%) and NTB (average yield contracted by 69bps to 0.4%) segments of the market. At this week’s OMO auction, the CBN offered bills worth NGN100.00 billion with allotments of NGN10.00 billion of the 138-day, NGN10.00 billion of the 180-day and NGN80.00 billion of the 362-day bills – at respective stop rates of 3.74% (previously 4.10%), 6.80% (previously 7.10%), and 8.00% (previously 8.45%).
Following the further contraction in yields witnessed this week, we expect demand for instruments in the T-bills secondary market to slow down in the coming week. Also, we expect investors’ focus to be on the PMA holding next week, where the CBN will rolling over NGN160.32 billion worth of maturing bills.
Bonds
The Treasury bonds secondary market remained bullish, as investors re-invested the ample liquidity in the system and covered for lost bids at Wednesday’s PMA.
Thus, the average yield across instruments contracted by 76bps to 4.2%. At the PMA, the Debt Management Office (DMO) offered instruments worth NGN30.00 billion to investors through re-openings of the 12.50% MAR 2035 (Bid-to-offer: 11.3x; Stop rate: 4.97%) and 9.80% JUL 2045 (Bid-to-offer: 4.4x; Stop rate: 6.00%) bonds. Despite a total subscription of NGN235.87 billion, the DMO eventually allotted instruments worth NGN45.00 billion, resulting in a bid-cover ratio of 5.2x.
We expect trading in the Treasury bonds secondary market to be buoyed by the excess liquidity in the system. Thus, we should see sustained demand and yield contraction across the curve as investors take positions in the coming week.
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