SAT. 18 MARCH 2023-theGBJournal | The Treasury bills secondary market traded with bearish sentiments this week, as the average yield across all instruments expanded by 163bps to 5.2%.
Across the segments, the average yield increased by 173bps to 5.4% in the NTB secondary market but remained at 3.0% in the OMO segment.
At the NTB auction, the CBN offered N161.87 billion – N1.10 billion of the 91-day, N918.38 million of the 182-day, and N159.85 billion of the 364-day – in bills.
Demand at the auction was higher than the previous PMA, as the total subscription level settled at N1.03 trillion (bid-to-offer settled at 6.4x) with more interest on the longer-dated bills (N1.01 trillion translating to 97.6% of the total subscription).
The auction closed with the CBN allotting precisely what was offered at respective stop rates of 2.55% (previously 1.44%), 5.00% (previously 6.00%), and 9.49% (previously 10.00%).
Given the expected tight liquidity in the system next week, we anticipate an increase in T-bills yields from current levels.
Meanwhile, trading in the FGN bonds secondary market was bearish, as investors stayed on the sidelines in anticipation of the bond PMA scheduled to hold next week Monday (20 March).
As a result, the average yield expanded by 20bps to 13.3%. Across the benchmark curve, the average yield inched higher at the short (+58bps) and long (+6bps) ends as investors took profit on the MAR-2024 (+191bps) and APR-2049 (+28bps) bonds, respectively. Meanwhile, the average yield was flat at the mid segment.
In the coming week, we expect the outcome of the March 2023 FGN treasury bond auction to influence the sentiments in the Treasury bond secondary market. At the auction, the DMO is offering instruments worth N360 billion through re-openings of the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 16.25% FGN APR 2037 and 14.80% FGN APR 2049 bonds.
Notwithstanding, we maintain our medium-term view that the FG’s frontloading of significant borrowings for the year will result in an uptick in bond yields, as investors demand higher yields in the face of elevated supply.
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