SAT 11 DEC, 2021-theGBJournal- The Treasury bonds secondary market opened the week on a bearish note (13bps higher), extending the sell pressures from last week. Though we witnessed pockets of demand for mid to long dated instruments, the demand level remained tepid.
Consequently, the average yield expanded by 15bps to 11.6%. Across the benchmark curve, yields contracted at the short (-9bps) and long (-3bps) ends due to demand for the JAN-2026 (-36bps) and JUL-2045 (-21bps) bonds, respectively, while yields expanded at the mid (+50bps) segment, following sell-offs of the FEB-2028 (+58bps) bond.
Notably, the DMO released the December 2021 bond auction circular indicating NGN100.00 billion on offer across the reopening of two instruments – JAN-2026 (NGN50.00 billion) and APR-2037 (NGN50.00 billion).
In the short term, we expect yields to oscillate around current levels, driven by thin maturities and deliberate efforts by the DMO to reduce domestic borrowing costs for the government. Also, we expect non-bank liquidity to be geared towards relatively higher non-sovereign instruments, thus tempering demand.
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