In line with the expectation, the Treasury Bills (“T-Bills”) secondary market started the week on a bullish note as buying interests were witnessed in the medium- to long-tenured bills following robust system liquidity (N247.3bn long as at Monday).
This bullish trend persisted throughout the rest of the week as the Central Bank of Nigeria (CBN) remained quiet regarding Open Market Operations (OMO) for the third consecutive week while inflows from maturing T-Bills pushed liquidity levels higher to N548.2 billion positive last week.
Consequently, yields were further compressed by 0.25 per cent Week-on-week ( W-o-W) to 12.1 per cent from 12.4 per cent the previous week. Particularly, strong demand was witnessed in the 03-Oct-19 (-121bps), 30-Apr-20 (-94bps) and 11-Jun-20 (-80bps) bills as average yields on medium to long-dated maturities tightened by 0.4 per cent apiece W-o-W.
“This week, we expect a slight moderation in demand within the secondary market in anticipation of a Primary Market Auction (“PMA”) slated for Wednesday where the CBN will rollover a total of N88.9 billion across the short- (N10.0 billion), medium- (N20.0 billion) and long-term (N58.9 billion) maturities”, said Afrinvest Redearch.
A bullish outlook is expected for the secondary market stemming from the sustained buoyant liquidity levels (N343.9 billion positive as at Friday) combined with N88.9 billion worth of T-Bills maturities scheduled to hit the financial system on Thursday and anticipate a resumption of interventions by the Apex bank.
“Thus, we advise investors to take advantage of the relatively more attractive yields at the longer end of the curve” said Afrinvest.
There was another bullish run as average yield declines 49 basis points (bps W-o-W to 13.2 per cent
Last week, the bonds market performance remained bullish as renewed buying interest was witnessed across the curve following the bond auction (1.7x oversubscribed) which held on Wednesday. Consequently, average yield declined by 49bps W-o-W from 13.8% the prior week to 13.2 per cent, with the 2020s and 2021s maturities enjoying the most buying interests.
At the bond auction, the Debt Management Office (DMO) offered a total of N100.0 billion across the 5-, 10- and 30-year maturities, and significant demand was witnessed across all tenors as the offer was 1.7x oversubscribed. The long-term offer enjoyed the most buying interest with a bid-to-cover ratio of 2.0x (N60.49 billion subscribed vs. N30.0 billion offered).
