…Activities in the FGN bonds secondary market were bearish this week, as most traders opened short positions ahead of this month’s bond auction amid the disappointing CPI print
…At the money market, the overnight (OVN) rate contracted by 44bps w/w to 32.6% following inflows from FGN bond coupon payments (N28.22 billion)
…The Debt Management Office (DMO) is scheduled to hold an NTB PMA next Wednesday (23 October), with instruments worth N374.67 billion to be offered to investors.
SAT OCT 19 2024-theGBJournal| In line with our expectations, trading in the Treasury bills secondary market remained bearish this week as market players sold bills to raise liquidity.
Thus, the average yield across all instruments expanded by 63bps to 24.9%. Across the market segments, the average yield expanded by 100bps to 24.2% in the NTB segment and inched higher by 1bps to 25.9% in the OMO segment.
We believe the projection of a better liquidity position next week will boost demand for bills, thereby driving down yields in the secondary market.
Also, the Debt Management Office (DMO) is scheduled to hold an NTB PMA next Wednesday (23 October), with instruments worth N374.67 billion to be offered to investors.
Similarly, activities in the FGN bonds secondary market were bearish this week, as most traders opened short positions ahead of this month’s bond auction amid the disappointing CPI print (+55bps to 32.70% y/y).
Thus, the average yield inched higher by 20bps to 19.3%. Across the benchmark curve, the average yield expanded at the short (+35bps), mid (+22bps), and long (+17bps) segments driven by sell pressures on the MAR-2025 (+130bps), FEB-2031 (+58bps) bonds, and JUN-2038 (+156bps), respectively.
Next week, we believe the direction of yields in the secondary market will be shaped by the outcome of this month’s FGN bond auction scheduled to hold on Monday (21 October).
At the auction, the DMO intends to offer instruments worth c. N200.00 billion through re-openings of the 19.30% FGN APR 2029 and 18.50% FGN FEB 2031 bonds, while the FGN MAY 2033 bond is now off-the-run.
Nonetheless, we maintain our medium-term expectation of elevated yields consequent on anticipated monetary policy administration globally and domestically, and sustained imbalance in the demand and supply dynamics.
At the money market, the overnight (OVN) rate contracted by 44bps w/w to 32.6% following inflows from FGN bond coupon payments (N28.22 billion).
Expectedly, the inflows were insufficient to provide support system liquidity, causing the OVN rate to remain elevated. Consequently, the average liquidity position declined, closing at a net short position of N1.51 trillion (vs a net short position of N643.66 billion in the previous week).
Next week, we believe the inflows from FAAC disbursements (N873.13 billion) will offset debits for the FGN bond PMA (c. 200.00 billion), thereby supporting system liquidity. As a result, we expect the OVN rate to trend lower.
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