Bond Market: Profit-taking Drag Yields, More Corporate Issuances Expected

Bond Market: Profit-taking Drag Yields, More Corporate Issuances Expected

Following chunks of profit-taking in the Bond Market, the fixed income closed mixed following bargain hunting witnessed in the Nigerian Treasury bill market, says Greenwich Merchant Bank in a note.

The Nigerian Treasury bill market closed bullish as bids dominated trading for the week.

Analysts at Greenwich observed that investors sought to cherry pick bills that were oversold in the previous week.

Meanwhile the OMO-bill market closed flat for the week despite loads of bid seen across the head and tail of the curve.

As a result, average Nigerian Treasury bill yield plunged by 40 basis points (bps) week on week to 0.1% from 0.5%, while average OMO-bill yield remains unchanged for the week at 0.2%.

In light of a robust system liquidity, stop rates in the scheduled Primary Market Auction (PMA) depressed further across the curve.

Bills worth NGN167.8 billion were offered and fully allotted at 0.04% (prev. 0.34%) for the 91 day-till-maturity (DTM), 0.15% (prev. 0.50%) for the 182DTM and 0.3% (prev. 0.98%) for the 364DTM.

Furthermore, bid-to-cover ratio at the auction settled at 3.6x.

Meanwhile, money market rates eased below 1% following a robust system liquidity (about NGN261 bn), thereby, the Overnight and Open Buy Back closed at 0.6% and 0.5% from 6.4% and 5.7% respectively in the prior week.

Moving on, investors in the bond market booked profit on overbought tickers ahead of the Primary Market Auction (PMA) and Inflation (CPI) data expected in the coming week.

Consequently, average bond yield soared to 4.1% from 3.9% at the close of trading in the prior week.

In the coming week, the Debt Management Office (DMO) is scheduled to sell bonds worth NGN90bn across the 15-YTM and 25-YTM.

“We expect traction to persist in the PMA and marginal rates to continue in a downward trend as seen in recent PMAs”, Greenwich stated.

Forging ahead to the new week, analysts at Greenwich said they look forward to a slow start despite expected inflows of NGN290.4bn from maturing bills and coupon payment as market players await the outcome of the bond PMA.

“We also anticipate more corporate issuances in the coming weeks as blue-chip companies take advantage of the low yield environment”, Greenwich stated.

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

Bond Market: Profit-taking Drag Yields, More Corporate Issuances Expected