SAT, 01 OCT, 2022-theGBJournal| The Treasury bills secondary market traded with bullish sentiments this week, as market participants took positions at the short and mid spectrum to cover for lost bids at the NTB PMA.
Consequently, the average yield across all instruments dipped by 17bps to 7.8%. Across the market segments, the average yield contracted by 28bps to 7.1% in the NTB segment, but increased by 88bps to 10.3% in the OMO secondary market.
At this week’s NTB PMA, the CBN offered N141.34 billion – N12.28 billion of the 91-day, N20.35 billion of the 182-day, and N108.71 billion of the 364-day – in bills.
Ultimately, the CBN allotted N179.32 billion – N2.16 billion of the 91-day, N3.34 billion of the 182-day and N173.81 billion of the 364-day bills – at respective stop rates of 6.49% (previously: 5.50%), 7.50% (previously: 6.00%), and 12.00% (previously: 9.75%).
With system liquidity expected to be tight in the coming week, we anticipate a further increase in the average yields on T-bills from current levels.
Bonds
This week, bearish sentiments dominated the treasury bonds secondary market, as investors’ repriced bonds upwards in reaction to the MPC’s hike in the key policy rate (15.5%).
As a result, the average yield expanded by 41bps w/w to 13.3%, driven by profit-taking activities across the short (+45bps), mid (+50bps), and long (+28bps) segments of the benchmark curve. Specifically, there were sell-offs on the ARP-2023 (+132bps), NOV-2029 (+57bps), and APR-2037 (+83bps) bonds.
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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