SAT. 11 MARCH 2023-theGBJournal | The Treasury bills secondary market closed on a bullish note this week, as the average yield across all instruments dipped by 37bps to 3.6%.
We attribute this performance to participants’ looking to compensate for unmet demand at the NTB PMA, amid quiet activity in the OMO segment of the market.
Across the segments, the average yield contracted by 39bps to 3.6% in the NTB segment, but remained flat at 3.0% in the OMO secondary market. At the NTB primary auction, the CBN offered to participants instruments worth N224.50 billion – N1.03 billion of the 91-day, N10.55 billion of the 182-day, and NGN212.92 billion of the 364-day bills.
The auction was keenly contested with a total subscription of N906.21 trillion (bid-to-offer: 4.0x) with more demand skewed towards the longer-dated bill (N890.55 billion translating to 98.3% of the total subscription).
Eventually, the CBN allotted bills worth N324.50 billion – N1.03 billion of the 91-day, N10.55 billion of the 182-day, and N312.92 billion of the 364-day – at respective stop rates of 1.44% (previously: 3.00%), 6.00% (previously: 3.24%), and 10.00% (previously: 9.90%).
In the coming week, we anticipate an upward tilt in T-bills yield, following our expectation of a lower system liquidity.
Nonetheless, we expect market focus to be shifted to the NTB PMA holding on Wednesday (15 March), where the CBN is scheduled to roll over N161.87 billion worth of bills.
This week, activities in the Treasury bonds secondary market were bullish as investors cherry-picked bonds with attractive yields across the short and long ends of the curve. As a result, the average yield contracted by 18bps to 13.1%.
Across the benchmark curve, the average yield contracted at the short (-36bps) and long (-18bps) ends due to demand for the MAR-2024 (-88bps) and APR-2037 (-39bps) bonds, respectively. Conversely, the average yield was flat at the mid segment.
We maintain our stance that the frontloading of significant borrowings by FG in H1-22 will result in an uptick in bond yields in the medium term, as investors demand higher yields in the face of elevated supply.
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