SAT, MAY 27 2023-theGBJournal | Trading in both the Nigerian Treasury bills and FGN Bonds secondary market were buoyant, attributed to improved system liquidity and investors cherry-picking attractive bonds across yield curve.
Trading activities in the Nigerian Treasury bills secondary market turned bullish this week, as the average yield contracted by 18bps to 6.8%.
Notably, this week’s bullish performance was attributed to the combined impact of the improved system liquidity and market participants moving to the secondary market to compensate for lost bids at Wednesday’s NTB PMA.
At this week’s NTB auction, the CBN offered bills worth N180.45 billion – N9.96 billion of the 91-day, N1.82 billion of the 182-day, and N168.67 billion of the 364-day – to market participants.
Demand was higher, especially for the 364-day bill (bid-to-offer: 4.4x), as the total subscription settled at N811.40 billion.
Eventually, the CBN allotted exactly what was offered at respective stop rates of 2.29% (previously 4.50%), 4.99% (previously 6.44%), and 7.99% (previously 8.99%).
For next week, analysts at Cordros Research say they expect yields in the NTB secondary market to maintain its current trend, supported by the buoyant liquidity in the system.
Meanwhile, proceedings in the FGN bonds secondary market were bullish this week, as investors cherry-picked attractive bonds across the curve, particularly at the mid and long segments of the naira curve.
Consequently, the average yield across all instruments contracted by 8bps to 14.0%. Across the benchmark curve, the average yield dipped at the short (-25bps) and long (-2bps) ends, as investors demanded the MAR-2024 (-88bps) and JAN-2042 (-10bps) bonds, respectively. Conversely, the average yield closed flat at the mid segment.
We reiterate our view that frontloading of significant borrowings for the year by the FG will result in an uptick in bond yields, as investors demand higher rates in the face of elevated supply.
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