SAT, MAY. 13 2023-theGBJournal |Activities in the Nigerian Treasury bills secondary market and FGN bonds secondary market were bullish this week.
At the T-Bills secondary market, the average yield declined by 85bps to 6.7%.
We attribute the lower yield in the market to the excess liquidity in the system this week, as well as participants covering for lost bids at the NTB PMA held during the week, on Wednesday.
At the auction, the CBN offered instruments worth N143.98 billion – N4.52 billion of the 91-day, N5.44 billion of the 182-day, and N134.02 billion of the 364-day –, and ultimately allotted the full offer amount.
The auction stop rates were 4.50% (previously 5.30%), 6.44% (previously 8.00%), and 8.99% (previously 10.17%) on the 91D, 182D, and 364D bills, respectively.
The auction was oversubscribed with a subscription level of N820.85 billion, translating to a bid-to-cover ratio of 5.7x (previous auction: 6.2x).
Next week, we envisage lower demand for T-bills in the secondary market following our expectations of a tighter system liquidity. Thus, we believe yields in the secondary market will head northward.
Meanwhile, proceedings in the FGN bonds secondary market closed on a bullish note this week, as some investors cherry-picked instruments with attractive yields across the curve, particularly at the mid and long tenor instruments.
As a result, the average yield across instruments contracted by 9bps to 14.0%.
Across the benchmark curve, the average yield dipped on the short end (-37bps) instruments, due to interest on the MAR-2024 (-173bps) bond, but expanded on the long end (+3bps) instruments following profit-taking on the MAR-2035 (+21bps) bond.
Meanwhile, the average yield was flat at the mid segment.
Next week, analysts at Cordros Research expects the result of the May 2023 FGN bond auction (15 May) to influence the sentiments in the secondary market.
At the auction, the DMO is offering instruments worth N360.00 billion through re-openings of the 13.98% FGN FEB 2028, 12.50% FGN APR 2032, 13.00% FGN JAN 2042 and 12.98% FGN MAR 2050 bonds.
”Over the medium term, we expect an uptick in bond yields as we believe investors will demand higher yields, which will be driven by significant borrowings expected from the FG for the year,” Cordros Research said.
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