Bearish Sentiment drags bond market, resurfaces in the T-Bills

Bearish Sentiment drags bond market, resurfaces in the T-Bills

In the bond market, sell-pressures dominated the domestic bond market as average yield rose by 44 basis points (bps) week on week to print at 14.3%.

Following a 2-day break, the market opened on Wednesday with yields trending northward by 27 basis points to close at 14.1%.

The bearish performance continued on Thursday and Friday as yields trended higher by 4bps and 13bps to settle at 14.1% and 14.3% respectively.Bearish Sentiment drags bond market, resurfaces in the T-Bills

The long-term bonds had the least sell-pressures as yields rose by 17 bps week on week while yields on short and medium-term bonds up 101bps and 104bps respectively.

In the Sub-Saharan Africa Eurobonds market, bullish momentum persisted with the exception of the Zambian 2027 instrument (+2bps) as average yield for instruments under our coverage dipped 4bps to 64bps.

The Zambian 2024 and 2022 instruments maintained the most buying interest as their yields were down by 177bps and 184bps respectively.

Similarly, the Ghanaian 2049 and Nigerian 2049 instruments trailed closely as yields declined 87bps and 81bps respectively week on week.

At the corporate Eurobonds segment, yields declined across all instruments under Afrinvest analysts’ coverage.

Yields on the Seplat 2023 and Ecobank 2024 instruments declined 63bps apiece; ranking as the most demanded instruments for the week.

The Fidelity 2022 and UBA 2022 instruments also enjoyed buying interest as yields plunged 53bps and 50bps week on week respectively.

“As global economic growth slows, investors would remain attracted to emerging market assets with high yield”, Afrinvest said.

In the money market, on the back of depressed system liquidity at N64.7 billion on Wednesday, OBB and OVN rates opened at 13.9% and 14.7%, slightly higher than last week’s close of 12.1% and 12.9% respectively.

Afrinvest said following inflows from open market operations, OMO, maturities of N123.0 billion on Thursday, system liquidity improved to N381.7 billion while OBB and OVN rates consequently declined to 11.7% and 12.6% respectively.

By week’s close, OBB and OVN rates printed at 18.0% and 19.6% respectively as system liquidity settled at N302.4 billion.

In line with its schedule, the CBN conducted a Primary Market Auction (PMA) on Thursday, offering instruments worth N34.4 billion with subscription and allotment of N146.6 billion and N34.4 billion respectively across all tenors.

The sale was at stop rates of 9.7%, 11.35% and 12.0% for the 91-day, 182-day and 364-day instruments respectively.

The CBN also conducted OMO auction worth N150.0 billion on Thursday, slightly above the same day’s OMO maturities of N123.0 billion.

As a result of stronger appetite for higher yields, there was weak investor interest across shorter tenors as the 84-day (Offer: N20.0 billion;

…Subscription: N5.9 billion) and 175-day (Offer: N30.0 billion; Subscription: N3.7 billion) instruments were under subscribed at 0.3x and 0.1x respectively

…while the 364-day (Offer: N100.0 billion; Subscription: N106.3 billion) instrument was oversubscribed at 1.1x.

The OMO instruments were issued at marginal rates of 11.8% (175-day) and 12.8% (364-day) while there was no allotment on the 84-day instrument.

In the secondary market, performance was bearish as rates trended 52bps higher week on week to 12.2%.

“We attribute the performance to relatively attractive yield at the OMO auction.

Sell-off was most evident on the 182-day instrument as the rate jumped 178bps week on week to 13.8% while the 91-day maturity declined 24bps to 11.7%; 364-day instrument however closed flat at 11.0%”, Afrinvest stated.

“In the coming week, we expect the CBN to guide OMO rates through interventions as we expect maturing instruments of N45.7 billion; although we anticipate that the weak demand in the T-Bills market may persist”, Afrinvest said.

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Bearish Sentiment drags bond market, resurfaces in the T-Bills


VIAJulius Alagbe
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