SAT, APRIL. 29 2023-theGBJournal| Trading in the Treasury bills secondary market was bullish as the buoyant system liquidity spurred demand for T-bills at the last two trading sessions of the week. Thus, the average yield across instruments contracted by 149bps to 7.3%.
Research analysts at Cordros Research notes that the aforementioned yield movement is non-inclusive of OMO instruments given the maturity of all outstanding instrument.
Cordros also notes that participants in this space shifted focus toward the NTB PMA that was held on Wednesday.
At the PMA, the CBN offered a total of N131.46 billion – N1.74 billion of the 91-day, N10.12 billion of the 182-day, and N119.61 billion of the 364-day – in bills the auction and ultimately allotted the full offer amount.
The auction stop rates were 5.30% (previously 6.00%), 8.00% (previously 8.00%), and 10.17% (previously 14.70%) on the 91D, 182D, and 364D bills, respectively.
The auction was oversubscribed with a subscription level of NGN819.10 billion, translating to a bid-to-cover ratio of 6.2x (previous auction: 1.9x).
”We expect yields to remain low next week as local investors continue to demand instruments amidst the liquidity surfeit in the system,” Cordros said.
Meanwhile, the Treasury bond secondary market remained bearish, as the average yield expanded by 46bps to 14.3%. We attribute the yield uptick to sell-offs on Thursday by fixed income dealers in anticipation of CRR debits.
Notwithstanding, buying interests resurfaced particularly at the long end of the benchmark curve following the liquidity influx from the aforementioned maturing bond and coupon payments.
Across the benchmark curve, the average yield contracted at the short (-125bps) and long (-12bps) ends as investors demanded the MAR-2024 (-66bps) and JUL-2034 (-26bps) bonds, respectively but expanded at the mid (+39bps) segment due to the sell-offs on the APR-2032 (+3bps) bond.
We remain resolute that the surplus liquidity in the market will support demand in the FGN bond secondary market and drive yields downwards in the interim. Over the medium term, we expect an uptick in bond yields as we believe investors will demand higher yields, which will be driven by significant borrowings expected from the FG for the year.
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