SAT, SEPT 30 2023-theGBJournal |Activities in the T-bills secondary market turned bullish this week as market participants moved to the secondary market to compensate for their lost bids at the week’s NTB PMA.
Thus, the average yield across all instruments contracted by 55bps to 8.1%. Across the market segments, the average yield at the NTB segment declined by 51bps to 7.9% and decreased by 126bps to 12.1% in the OMO segment.
At this week’s NTB auction, the CBN offered instruments worth N177.12 billion – N1.75 billion for the 91-day, N1.56 million for the 182-day and NGN173.81 billion for the 364-day – to market participants.
Demand at the auction was higher than the previous PMA, as the total subscription level settled at N786.79 billion (previous auction: N643.88 billion).
Eventually, the CBN allotted precisely what was offered at respective stop rates of 4.99% (previously: 6.50%), 6.55% (previously: 7.00%), and 11.37% (previously: 12.98%).
Next week, Cordros Research analysts say they anticipate yield in the Treasury bills secondary market will likely increase as the possible slim liquidity position will drive down demand for bills.
Meanwhile, proceedings in the FGN bonds secondary market traded the week mainly on a calm note but turned bullish at the end of the week as the average yield contracted by 3bps w/w to 14.4%.
Across the benchmark curve, the average yield contracted at the short (-19bps) and long (-2bps) ends following buying interest in the MAR-2024 (-86bps) and APR-2037 (-9bps) bonds, respectively.
Conversely, the average yield expanded at the mid (+7bps) segment as market participants took profits off the APR-2032 (+8bps) bond.
Over the medium term, yields in the FGN bond secondary market are expected to remain elevated, driven by the sustained imbalance in the demand and supply dynamics.
However, we highlight that deliberate actions by the DMO to keep borrowing costs moderate remain a downside factor.
At the money market, the overnight (OVN) rate expanded by 10bps w/w to 3.4% despite the FGN bond coupon payments (N202.34 billion) inflows at the end of the week.
However, we highlight that the average system liquidity closed slightly higher this week at a net long position of N137.20 billion (vs. a net long position of N109.42 billion in the previous week).
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