SAT AUG 17 2024-theGBJournal| Bullish sentiments prevailed in the Treasury bonds secondary market this week as traders sought to take advantage of current rates following the reduction in the offer size for the FGN bond PMA to N190.00 billion (previously: N300.00 billion).
The reduction comes amid the positive CPI data print for July (-80bps to 33.40% y/y).
Accordingly, the average yield contracted by 35bps to 19.7%. Across the benchmark curve, the average yield declined at the short (-43bps), mid (-21bps), and long (-12bps) segments following buying interests in the APR-2029 (-127bps), JUL-2030 (-60bps), and JUN-2053 (-52bps) bonds, respectively.
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 (19 August).
At the auction, the Debt Management Office (DMO) is set to offer instruments worth N190.00 billion through re-openings of the 19.30% FGN APR 2029, 18.50% FGN FEB 2031 and 19.89% FGN MAY 2033 bonds.
Similarly, the Treasury bills secondary market turned bullish this week, following notable buying interests in mid-dated and long-dated papers.
Consequently, the average yield across all instruments contracted by 67bps w/w to 25.3%. Across the market segments, the average yield declined by 86bps to 24.9% at the NTB segment and contracted by 31bps to 25.8% at the OMO segment.
We believe the subdued system liquidity next week will undermine demand for instruments in the T-bills secondary market, causing yields to expand. Additionally, the CBN is scheduled to hold an NTB PMA next Wednesday (21 August), with N409.98 billion worth of maturing bills on offer.
At the money market, the overnight (OVN) rate declined by 99bps w/w to 33.0% as the inflow from OMO maturities (N20.50 billion) and banks’ activity at the CBN SLF window (N1.82 trillion) supported system liquidity.
Thus, the average system liquidity settled higher at a net long position of N407.16 billion (vs net long position of N10.61 billion in the previous week)
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