SAT. 11 FEB, 2023-theGBJournal| This week, the Treasury bonds secondary market closed on a bullish note, as investors took positions at the short end of the curve ahead of the bond PMA scheduled to hold next week Monday.
As a result, the average yield dipped by 17bps to 13.1%. Across the benchmark curve, the average yield contracted at the short (-67bps) end following the interest on the MAR-2025 (-151bps) bond, but expanded slightly at the long (+8bps) end due to investors taking profits off the APR-2037 (+30bps) bond. Conversely, the average yield was flat at the mid segment.
Next week, we expect the outcome of the FGN bond primary auction scheduled to hold on Monday (13 February) to shape the direction of yields in the secondary market. At the auction, the DMO is offering instruments worth NGN360.00 billion through re-openings of the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 16.25% FGN APR 2037 and 14.80% FGN APR 2049 bonds.
Meanwhile, bullish sentiments persisted in the Nigerian Treasury bills secondary market, as the average yield across all instruments contracted further by 22bps to 1.5%. We attribute this performance to higher demand as investors looked to cover for lost bids at the NTB PMA on Wednesday. Across the market segments, the average yield contracted by 68bps and 10bps to 1.3% and 1.5% in the OMO and NTB secondary markets, respectively.
At the primary auction, the CBN offered instruments worth N217.06 billion – N4.52 billion of the 91-day, N1.31 billion of the 182-day, and N211.23 billion of the 364-day bills. Demand was at its highest level at a total subscription of N1.06 trillion (bid-to-offer settled at 4.9x) with more interest on the longer-dated bills (N1.03 billion translating to 97.6% of the total subscription).
Eventually, the CBN allotted bills worth N417.06 billion – N4.52 billion of the 91-day, N1.31 billion of the 182-day, and N411.23 billion of the 364-day – at respective stop rates of 0.10% (previously: 0.29%), 0.30% (previously: 1.80%), and 2.24% (previously: 4.78%)
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