Analysts at Greenwich Trust Limited (, a financial solutions provider, in its fixed income report said that in a month dominated by market reforms and vigour, it witnessed change in dynamic in the treasury market.

The firm’s research analysts said they expect yields to reduce in the light of expected maturities hitting the system in November.

“In November, we anticipate N1.462 trillion in maturing OMO bills along with N275.46 billion worth of PMA bills”, it said.

With this amount in pipeline, analysts anticipate that the funds will trickle into the bond and equity market, consequently pressuring yields across the curve lower.

GTL stated that furtherance to the Apex bank’s follow up on its market directive of baring debtors from owing treasuries.

It directed all banks to adequately fund their accounts ahead of open market operation (OMO) results.

“In our view, this is an attempt to curb bloated demand we witnessed earlier in October in an attempt to meddle with stop rates”, the firm stated.

CBN had in a circular directed banks to exclude individual and non-deposit money banks from participating in OMO from both primary and secondary market transactions.

That would mean that only foreign portfolio investors and deposit money banks are allowed.

The proclamations have however reduced investible securities in the market that is dearth of varieties, Greenwich said.

The firm stressed that OMO by etymology is not an investible security but a mechanism by an Apex bank to infuse or mop up liquidity from circulation.

“One would think the CBN is patting towards returning OMO to its intending state but the inclusion of foreign portfolio investors’ states otherwise”, the firm revealed.

Greenwich Research thinks the CBN hold plethora of reasons by implementing these directives; in a bid to curb inflated bids at auctions.

Such that the Apex bank requires banks to prefund accounts before auction results are published.

Greenwich view is that to push debtors to service their debts and consequently reduce non-performing loans in the banking sector, the CBN pushed to restrict debtors from owning treasury instruments.

This we contend, it said.

The CBN in a bid to spur and influence participation in the equity market (we have seen stronger inflows to the bonds market) which has remained relatively muted for the year.

The firm stated that the Apex bank restricting individual investors and non–deposit money banks from participating in OMOs is to shore up its FX reserves.

It said: “The apex bank is doing this to temper down capital flight seen lately that resulted in the depletion of the FX reserve and weakening investor confidence”.

This is as a result of increased volatility in the energy market which is a major source of revenue for the sovereign, heightened global recessionary indicators and persistent Naira devaluation rhetoric.

“We expect to see increased buy sentiments in at Primary Market Auctions (PMAs), Bond Auctions and secondary market participation”, Greenwich noted.

Data obtained from FMDQ indicates a solid growth in bond turnover for October when compared with data for September.

In October, a total of 2,057 trades were executed compare to 1,216 in September, representing a premium of 69% valued at N1.542 trillion as against N932 billion in September.

Furthermore, the bills market in terms of turnover plunged. 11,523 trades were executed in October against 12,678 the prior month; this represents a decline of 9%.

Analysts at Greenwich said this is in tandem with its expectation, market players will seek to thrive in the bonds space due to pressure in the bills space as a result of new market dynamics.

The CBN in its scheduled PMA will roll over N275.46 billion worth of maturating bills, however with the Apex lingering N1.462 trillion from OMO maturity.

“We anticipate the funds trickling into the bond and equity market, consequently pressuring yields across the curve lower”, analysts at Greenwich said.

Initially the treasury bills average yields trended higher, towards the end of the month, we saws yields steep lower driven by market players hunting for bills to invest their idle funds.

This was in the light of unavailability of investible securities to absorb the lingering liquidity due to the OMO restriction by the CBN.

Average Treasury bill yield compressed by 59 basis points then settled at 12.69% from 13.28% in the prior month.

Buy pressure was witnessed across all maturities, although investors sentiment was skewed towards the July 2020 maturities, pushing yields southward to 12.26% from 14.50% in the previous month.

In an attempt to manage liquidity in the system the CBN conducted five OMOs, offering bills worth N1.26 trillion to the market, however sold a total of N1.693 trillion.

OMO maturities in October amounted to N2.008 trillion. Going further, the CBN conducted three PMA, selling bills worth over N388.40 billion across the 91, 182 and 364–DTM .

This came at an average stop rate of 10.46% (prev. 11.10%), 11.01% (prev. 11.77%) and 12.54% (prev. 13.29%) representing a decline of 5.76%, 6.45% and 5.64% respectively with demand strongly geared towards the 364 maturity.

Bill worth N360 billion matured in October. Going forward, activities in the bond market commenced on a relatively quiet note as average yield moved marginally upward.

However buy interest picked towards the end of the month pressuring yields downward to 12.78% from 14.15% in the prior month indicating a decrease of 137 basis points in average yields.

Analysts said they saw investors display increased appetite for the July 2021 and March 2024 maturity pressuring yields lower by over 200 basis points.

Investors’ participation intensified in October with increased turnover and Foreign Portfolio Investment when compared to September.

The Debt Management Office in October auctioned bonds across the 4, 10 and 30 year-to-maturity at 14.05% (prev. 14.39%), 14.23% (prev. 14.43%) and 14.60%(prev. 14.64%) respectively.

A total amount of N140 billion was sold of the N250 billion subscriptions, investors bid was geared towards the 10 year maturity, settling the bid to cover ratio at 1.83x.

System liquidity remain elevated, the banking balance closed significantly higher by over a 143% to settle at N474.81 billion in October compared to N195 billion the prior month.

Albeit, the overnight (O/N) and the Open buy back rate (OBB) softened by 39.02% and 42.00% to settle at 5.36% and 4.64% from 8.79% and 8.00% it recorded in September respectively.

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