Dearth of Alternative Pressured Treasury Assets Yields Downward
The fixed income and money market continue to garner interest following persistent bids seen across the markets in reaction to lower than expected stop rates at the week’s Primary Market Auction (PMA).
The Nigerian Treasury Bill (NTB) and open market operations (OMO) bill markets closed bullish as investors took positions across the curve, says Greenwich Limited in a note.
Consequently, the average NTB yield plummeted to 1.1% from 1.4% and the average OMO-bill yield plunged to 1.2% from 1.4% at the close of the week.
Meanwhile, the Nigeria’s central bank sold bills worth ₦125.0 billion in its scheduled Primary Market Auction (PMA) across the 91 day to maturity (DTM), 182DTM and 364DTM at 1.0% (previous: 1.1%), 1.0% (1.5%) and 2.0% (2.8%) respectively.
Greenwich posited that the pressure at the fixed income and money market will persist in the meantime considering the dearth of alternative investment vehicles to absorb the robust system liquidity prevalent in the market.
Similarly, liquidity continues to play big factor in the money market pricing equation.
This week, money market rates returned to low single digits following elevated liquidity from OMO-bill maturities (₦370.0bn).
Accordingly, the Overnight and Open Buy Back closed at 2.0% and 1.2% from 4.9% and 4.0%, respectively in the prior week.
Steering on, Greenwich stated that average bond yield pressured southward to 5.0% from 6.3% at the close of trading in the prior week.
The firm reckoned that market players remain attracted to maturities across the bond curve bolstered by robust system liquidity and a dearth of alternative investment outlets.
“We expect an active secondary market in the coming week, hinged on a system awash with liquidity of about ₦550 billion compounded by expected OMO-bill maturity worth ₦285 billion”, Greenwich stated.
The Debt Management Office is proposing a surprising ₦30.0bn worth of bonds in its October Primary Market Auction (PMA).
This is against ₦150.0bn previously offered.
Read More: Money Market Funding Pressure Eased on OMO Repayment
Analysts said this means a lot of orders would be left unfilled, thereby further exacerbating the pressure on yields in the secondary market.
Dearth of Alternative Pressured Treasury Assets Yields Downward
