SAT, 13 AUG, 2022-theGBJournal| Activities in the Treasury bills secondary market were bearish, as the average yield across all instruments expanded by 12bps to 8.7%. We attribute this bearish sentiment to participants shifting their focus to the bi-weekly PMA during the week.
At this auction, the CBN offered N150.62 billion – N1.02 billion of the 91-day, N1.82 billion of the 182-day, and N147.78 billion of the 364-day – in bills. As in the previous auction, the auction closed with the CBN allotting precisely what was offered at respective stop rates of 3.50% (previously 2.80%), 4.50% (previously 4.10%), and 7.45% (previously 7.00%).
Across the segments, the average yield increased by 31bps and 1bp to 7.8% and 11.1% at the NTB and OMO secondary markets, respectively.
Next week, we expect the yields on T-bills to maintain the same trajectory, following the thin liquidity expected in the system.
Bearish sentiments persisted at the Treasury bonds secondary market this week as the average yield expanded by 45bps to 12.7%. This, we attribute to weak demand witnessed this week as investors positioned ahead of next week’s bond PMA.
Across the benchmark curve, the average yield inched higher at the short (+83bps), mid (+55bps), and long (+8bps) segments as investors took profit off the APR-2023 (+163bps), FEB-2028 (+84bps), and MAR-2035 (+45bps) bonds, respectively.
In the coming week, we expect the outcome of the August 2022 FGN auction holding on Monday (15 August) to influence the sentiments in the Treasury bond secondary market. At the auction, the DMO will offer instruments worth N225.00 billion through re-openings of the 13.53% FGN MAR 2025, 12.5000% FGN APR 2032 and 13.0000% FGN JAN 2042 bonds. Notwithstanding, we maintain our stance that yields will continue to rise over the short-term given that the FGN’s borrowing plan for 2022FY and expected fiscal deficit point towards an elevated supply.
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