SAT APRIL 06 2024-theGBJournal| The Treasury bills secondary market closed on a bearish note this week, as the average yield across all instruments expanded by 91bps to 18.9%.
We attribute this week’s performance to the liquidity dearth occasioned by players’ funding for the OMO auction held on Wednesday.
Across the segments, the average yield increased by 125bps to 18.9% in the NTB secondary market but declined by 8bps to 18.4% in the OMO segment. At the OMO auction, the Central Bank of Nigeria (CBN) offered N500.00 billion – N75.00 billion of the 95-day, N75.00 billion of the 179-day, and N350.00 billion of the 361-day – in bills.
The total subscription level settled at N1.20 trillion (bid-to-offer: 2.4x) with more interest on the longer-dated bills (N1.16 trillion translating to 96.9% of the total subscription).
The auction closed with the CBN allotting N649.65 billion – N17.00 billion of the 95-day, N7.25 billion of the 179-day, and N652.40 billion of the 361-day instruments – at respective stop rates of 19.00% (unchanged), 19.50% (unchanged), and 21.13% (previously 21.50%).
Analysts at Cordros Research say they anticipate a further increase in yields in the T-bills secondary market.
In addition, the CBN is scheduled to hold an NTB PMA on Wednesday (10 April) with NGN149.64 billion worth of maturities on offer.
Meanwhile, trading in the FGN bonds secondary market turned bullish this week, as investors showed interest in short- and mid-dated instruments.
As a result, the average yield contracted by 10bps to 19.3%. Across the benchmark curve, the average yield declined at the short (-12bps) and mid (-36bps) segments due to demand for the MAR-2027 (-78bps) and FEB-2031 (-67bps) bonds, respectively. Meanwhile, the average yield was flat at the long end.
Sequel to the release of the Q2-24 bond auction calendar by the DMO, we expect players to reshuffle their portfolios in anticipation of the upcoming PMA where increased supply into the market is expected.
Notwithstanding, we maintain our short-term view that anticipated monetary policy administration globally and domestically and sustained imbalance in the demand and supply dynamics will keep yields elevated in the market.
Similarly, this week, the FGN Eurobond market experienced a mix of sentiments influenced by various reports from the US.
Particularly noteworthy was the US ISM Manufacturing PMI report for March, which disclosed an uptick to 50.30, diverging from both anticipated figures and the preceding reading of 48.8 and 47.8, respectively.
Furthermore, the US ISM Services PMI report for March also deviated from its projected value of 52.70, settling at 51.40. As the week drew to a close, the NFP and Unemployment data for March stood at 303k and 3.80%, respectively, in contrast to anticipated figures of 200k and 3.90%.
Consequently, the average benchmark yield witnessed a WoW increase of 14 bps, reaching 9.41%.
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