SAT. 01 APRIL 2023-theGBJournal | Activities in the Treasury bills secondary market this week were bearish as the tight system liquidity continues to drive participants to sell off their holdings across the NTB segment of the market. As a result, the average yield across the market expanded by 181bps to 7.5%.
Across the market segments, the average yield at the NTB segment advanced by 194bps to 7.7% but remained at 4.0% in the OMO segment. At this week’s NTB auction, the CBN offered instruments worth NGN145.47 billion – NGN2.16 billion for the 91-day, NGN3.34 billion for the 182-day, and NGN139.96 billion for the 364-day.
Demand at the auction was significantly lower than the previous PMA, as the total subscription level settled at NGN168.58 billion (bid-to-offer settled at 1.2x vs. the previous auction: 6.4x). The auction closed with the CBN allotting precisely what was offered with respective stop rates of 6.00% (previously 2.55%), 8.00% (previously 5.00%), and 14.74% (previously 9.49%).
Next week, we envisage higher yields in the Treasury bills secondary market, following our expectations of low inflows into the financial system.
The FGN bonds secondary market closed this week on a bearish note as investors sold their positions across the curve following the release of the Q2-23 bond issuance calendar where the DMO replaced the 2037 and 2049 bonds with the 2042 and 2050 bonds.
Accordingly, the average yield expanded by 37bps to 13.6%. Across the benchmark curve, the average yield expanded at the short (+83bps), mid (+21bps), and long (+27bps) segments following selloffs of the MAR-2024 (-321bps), APR-2032 (-48bps) and JAN-2042 (-42bps) bonds, respectively.
We maintain our view that the significant borrowings expected from the FG for the year will result in an uptick in bond yields in the medium term, as investors demand higher yields in the face of elevated supply.
Twitter-@theGBJournal|Facebook-the Government and Business Journal|email:gbj@govbusinessjournal.ng| govandbusinessj@gmail.com
