SAT, 24 SEPT, 2022-theGBJournal| Bullish sentiments persisted in the Treasury bills secondary market this week as the ample system liquidity, specifically at the beginning of the week, supported participants’ demand for bills.
As a result, the average yield across all instruments contracted by 37bps to 8.0% – the average yield at the OMO segment dipped by 113bps to 9.4% and contracted by 15bps to 7.4% at the NTB segment
Following the expected tighter liquidity in the system next week, we expect bearish sentiments to dominate the T-bills market and drive higher yields. Also, we expect market focus to be shifted to the NTB PMA holding on Wednesday (28 September), with the CBN expected to roll over NGN141.34 billion worth of instruments.
Bonds
Elsewhere, trading in the Treasury bonds secondary market ended on a bearish note as investors re-priced bonds in anticipation of the MPC meeting scheduled to hold Monday and Tuesday next week.
Consequently, the average yield expanded by 15bps to 12.9%. Across the benchmark curve, the average yield expanded at the short (+41bps), and long (+7bps) ends following investors’ profit-taking activities on the MAR-2024 (+110bps) and APR-2037 (+76bps) bonds, respectively; but was unchanged at the mid segment.
The DMO conducted the September 2022 FGN bond PMA on Monday (19 September). At this auction, instruments worth NGN225.00 billion were offered to investors through the reopening of the 13.53% MAR 2025 (Bid-to-offer: 0.6x; Stop rate: 13.50%), 12.50% APR 2032 bond (Bid-to-offer: 0.8x; Stop rate: 13.85%) and 16.25% APR 2037 (Bid-to-offer: 1.9x; Stop rate: 14.5%).
Total subscriptions across the offer instruments settled at N246.43 billion, with the DMO eventually allotting instruments worth N229.20 billion, resulting in a bid-cover ratio of 1.1x.
We maintain our view of an uptick in bond yields in the medium term, as the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply.
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