SAT, FEB 10 2024-theGBJournal|Treasury bonds secondary market maintained its bearish trend as market players exited short positions following hints from the CBN Governor about potential increases in short-term interest rates.
As a result, the average yield increased by 72bps to 15.5%. Across the benchmark curve, the average yield expanded across the short (+127bps), mid (+30bps), and long (+78bps) segments due to the profit-taking activities on the MAR-2024 (+471bps), JUN-2033 (+118bps) and APR-2034 (+227bps) bonds, respectively.
Yields in the FGN bonds secondary market is expected to trend upwards over the short term.
At the Treasury bills secondary market bearish sentiments dominated this week as the average yield across all market segments expanded by 626bps to 15.9%.
Across the market segments, the average yield advanced by 569bps to 15.4% in the T-bills secondary market and inched higher by 830bps to 17.9% in the OMO segment.
The rise in yield is attributed to sell-offs induced by the CBN’s revised NTB auction calendar on Monday to record-high levels, and the significantly higher yields at the end of the Wednesday PMA filtering into the secondary market.
At the primary auction, the CBN revised the auction offer to N1.00 trillion – N200.00 billion of the 91-day, N200.00 billion of the 182-day, and N600.00 billion of the 364-day bills – from the NGN417.06 billion previously announced.
The auction was keenly contested as the total subscription settled higher at N1.98 trillion (bid-to-offer: 2.0x). Eventually, the CBN allotted exactly what was offered – at respective stop rates of 17.24% (previously: 5.00%), 18.00% (previously: 7.15%), and 19.00% (previously: 11.54%).
Meanwhile, the overnight (OVN) rate contracted to 17.0% (-420bps w/w) contrary to expection, despite the debits for net NTB issuance (N582.94 billion) and amid the apex banks’ termination of daily CRR debits (to normalise the CRR management mechanism).
However, deposit money banks’ (DMB) participation at the CBN’s SLF window supported system liquidity as the average system liquidity closed higher at a net long position of N243.23 billion (vs. a net long position of N133.10 billion in the previous week).
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