SAT. 21 JANUARY, 2023-theGBJournal| Activities in the Treasury bills secondary were mixed, albeit with a bullish tilt, as the average yield across all instruments pared by 2bps to 3.4%.
We attribute this performance to increased demand witnessed for OMO bills amid selloffs at the NTB segment.
Consequently, the average yield at the OMO segment contracted by 48bps to 2.9%, while the average yield at the NTB secondary market expanded by 16bps to 3.5%.
Following the expected liquidity surfeit in the coming week, we expect higher demand for T-bills and a slight contraction in yields from current levels.
Nonetheless, we expect market focus to be shifted to the NTB PMA holding on Wednesday (25 January), with the CBN scheduled to roll over NGN220.53 billion worth of bills.
The Treasury bonds secondary market remained bearish as the average yield across instruments expanded by 64bps to 13.4%.
We attribute this week’s bearish sentiment to investors re-pricing bonds upwards in reaction to the release of the Q1-23 FGN bond issuance calendar, which showed higher volume on offer (NGN1.20 trillion vs. NGN480.00 billion: Q1-22) by the DMO.
Across the benchmark curve, the short (+53bps), mid (+49bps), and long (+86bps) term instruments recorded expansions in yields. Specifically, the MAR-2027 (+166bps), APR-2032 (+67bps), and MAR-2036 (+121bps) bonds, recorded the largest yield increases.
In the medium term, we expect frontloading of significant borrowings for the year by the FG to result in an uptick in bond yields, as investors demand higher yields in the face of elevated supply.
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