Demand Drives Bullish Outing as Average Yield on T-Bills
Amidst strong financial system liquidity, average yield on Nigerian Treasury Bills (NTB) dip to 1.4% as demand drives bullish outing.
The bearish sentiment in the NTB secondary market was reversed as buying interest – triggered by high financial system liquidity – pressured average yield 46 basis points downwards week on week across board.
In more detail, Afrinvest said most demand was realized on long-term NT-Bills due to more attractive offers especially on the 29-Aug-2021 and 09-Sep-2021 bills, both shedding 1.0% apiece.
Thus, average yield at the long end of the curve contracted 82 basis points (bps) in the week from 2.5% to 1.7%.
In the same vein, short-term bills declined 16bps due to an equal spread of demand while performance on medium-term bills was flat with a bullish bias as average yield marginally dipped 3bps.
At the Open Market Operations (OMO) segment, N567.7 billion worth of maturities on Thursday led to a spike in liquidity levels (N1.0tn by Friday last week) as well as pressured demand in the OMO segment.
The Apex bank however offered only N100.0 billion via OMO Auction to mop up excess liquidity. Consequently, average yield across OMO instruments declined 53bps to 1.4%.
Going into the week, Afrinvest said the CBN is slated to conduct an NT-Bills Primary Market Auction (PMA) on Wednesday, offering N104.9 billion (84.0% worth of maturing PMA bills) across the 91-, 182- and 364-Day tenors.
“We expect buying sentiment in the NT-Bills space to simmer down as market players may shift focus to PMA offerings and other investment alternatives due to the unattractive yields. However, liquidity levels are also expected to further pressure demand as OMO and NT-bills maturities worth ₦370.0bn and ₦104.9m respectively hit the system”, the firm projected.
Consequently, Afrinvest advice is for investors to look out for possible Commercial Paper offerings and other money market alternatives, while risk averse investors may hunt for opportunities on medium-term NT-Bills that traded flat last week.
In the local bond space, strong demand was sustained on the back of high liquidity levels as matured funds from OMO and NT-Bills also filtered into the Bond market.
Thus, average yield across all instruments declined 58bps week on week from 6.8% to 6.3% on Friday.
Medium-Term bonds witnessed the most demand, shedding 90bps as Feb-2028 and Jan-2026 instruments dipped the most by 1.5% and 1.3% respectively.
Similarly, short- and long-term bonds also contracted 13bps and 55bps respectively.
On the flipside, Jan-2022 bond was the lone advancer last week, gaining 41bps due to profit taking towards the end of the week.
In the FGN bond market this week, Afrinvest said it expects the bullish sentiment to be sustained as investors hunt for attractive opportunities across the curve and high liquidity levels may further pressure yields downwards.
“Investors are advised to cherry pick high yielding instruments while looking out for investment-grade corporate bonds with relatively more attractive returns”, Afrinvest stated.
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Demand Drives Bullish Outing as Average Yield on T-Bills Dip