SAT, JAN 20 2024-theGBJournal|Trading in the Treasury bonds secondary market turned bearish this week, as the average yield expanded by 27bps to 13.6%. We attribute this cautious bias to the underwhelming Dec-23 inflation data released by the NBS on Monday coupled with market players anticipating the DMO’s release of Q1-24 FGN bond issuance calendar.
Across the benchmark curve, the average yield advanced across the short (+8bps), mid (+54bps), and long (+12bps) segments due to sell pressures on the FEB-2028 (+44bps), APR-2029 (+85bps) and JUL-2034 (+35bps) bonds, respectively.
Given our analysis of the factors expected to influence market direction in 2024E – such as (1) monetary policy stance globally and domestically and (2) sustained imbalance in the demand and supply dynamics – we expect yields in the FGN bonds secondary market to trend upwards in the medium term.
The FGN Eurobonds exhibited cautious trading as the week commenced with a bearish tone, attributing the downturn to the anticipation of a US recession following the release of its Retail Sales data.
This development led to a decrease in the likelihood of a rate cut in the US by March 2024. However, the bearish sentiment was mitigated after the release of the Michigan Consumer Sentiment on Friday, surpassing expectations at 78.80 compared to the previous level of 69.70 and an expected 70.
Consequently, the average benchmark yield concluded the week with a 7 bps increase, settling at 9.90%.
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