…CBN is scheduled to conduct an NTB PMA next Wednesday (March 26), with N700.00 billion worth of maturing bills on offer.
SAT MARCH 22 2025-theGBJournal| The Treasury bills secondary market was bearish this week, underpinned by the liquidity dearth in the financial system and market participants selling off bills to participate in the primary market auction.
The average yield expanded by 15bps to 20.9%. Across the market segments, the average yield advanced by 11bps and 13bps to 19.3% and 22.5% in the NTB and OMO segments, respectively.
At Wednesday’s NTB auction, the Central Bank of Nigeria (CBN) offered bills worth N800 billion – N100 billion for the 91D, N200 billion for the 182D, and N500 billion for the 364D bills.
Subscription level settled lower at N902.04 billion (previous auction: NGN1.27 trillion), with a bid-to-offer ratio of 1.1x (previous auction: 2.3x).
The auction closed with the Debt Management Office (DMO) allotting N503.92 billion – N27.19 billion for the 91D, N40.02 billion for the 182D, and N436.71 billion for the 364D papers – at respective stop rates of 18.00% (previous: 17.00%), 18.50% (previous: 17.79%) and 19.94% (previous: 18.39%).
Cordros Research analysts say they expect the still tight interbank liquidity to cause yields to slightly rise further in the secondary treasury bills market.
Additionally, CBN is scheduled to conduct an NTB PMA next Wednesday (March 26), with N700.00 billion worth of maturing bills on offer.
Similarly, the FGN bond secondary market experienced bearish sentiments, with investors exiting positions on the MAR-2025 bond ahead of its maturity on March 23.
Accordingly, the average yield increased by 28bps to 18.80%. Across the benchmark curve, the average yield increased at the short (+71bps), mid (+20bps), and long (+4bps) segments following selloffs of the MAR-2025 (+344bps), JUN-2033 (+32bps), and JAN-2042 (+24bps) bonds, respectively.
Next week, we believe the outcome of this month’s FGN bond auction on Monday (24 April) will shape the direction of yields in the secondary market.
At the auction, the DMO is set to offer instruments worth N300 billion through re-openings of the APR-2029 and MAY-2033 bonds.
Over the medium term, we still expect moderation in bond yields to be influenced by the anticipated dovish monetary policy stance and demand and supply dynamics.
At the money market, the overnight (OVN) rate expanded by 10bps w/w to 32.9% as NTB auction debits (NGN503.92 billion) offset inflows from FGN bond coupon disbursements (NGN397.33 billion).
Consequently, the average system liquidity worsened to settle at a net short position of N1.52 trillion (vs net short position of N463.62 billion in the previous week).
Next week, we expect FGN bond PMA debits (c. N300.00 billion) to outweigh inflows from FGN bond coupon disbursements (N202.34 billion), causing the OVN rate to remain elevated.
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