Market Swings Positive with Nigerian Treasury Bills, Negative on Bonds
Fixed income market investors were largely bullish on Nigerian Treasury Bills (NTB) but negative performance was recorded in bonds segment.
Due to bargain hunting, average yield on NTB plunged 2 basis points amidst strong demand pressure recorded on Wednesday.
Meanwhile, funding pressures were benign as financial system liquidity remained robust, albeit opening slightly lower at N633.2 billion from N668.3 billion yesterday.
Consequently, interbank funding rates traded range bound, as the Open Buy Back (OBB) rose marginally by 5bps to 0.67%, while the Overnight (OVN) rates eased by 2bps to 0.92%.
“We expect funding pressures to remain benign, at least until Friday when liquidity will be squeezed by the settlement of the monthly bond auction held today”, Chapel Hill Denham said.
In a note, analysts said the fixed income market trade pattern was mixed as primary market auctions (NTB and bond) were underway.
At the front end of the curve, the Treasury Bills curve eased marginally to 0.51%, while the open market operations (OMO) curve closed flat at an average of 0.42%.
On the other hand, bonds traded bearish, driven by selloff on short (+15bps to 2.58%) and intermediate (+22bps to 5.91%) bonds.
Consequently, the average bond yield curve expanded by 13bps to 5.39% as outcome of the NTB auction was bullish, while bond was bearish.
At the rollover NTB auction, the apex bank, on behalf of the Debt Management Office, offered a total of N7 billion across three tenors and allotted the same amount.
Given the small volume on offer, bid-cover ratio jumped to 17.36x from 2.02x at the previous auction, as subscription level totaled N121.53bn.
Analysts said the outcome of the auction can be deemed bullish, as the 182-day and 364-day rate cleared lower 10bps and 206bps to 0.500% and 1.139% respectively.
However, the 91-day tenor cleared slightly higher by 4bps to 0.048%.
At the monthly bond auction that held today, the DMO offered N60bn as expected, split equally between the MAR2035 and JUL2045 instruments.
Chapel Hill Denham noted that demand was strong as anticipated, as subscription level hit N134.06bn, indicating a bid-cover multiple of 4.5x (2.3x previously).
However, investors’ demanded for higher yields, which led the DMO to allot only N30bn: N20bn of MAR2035 and N10bn of JUL2045.
Marginal rate inched higher on the 2035 by 195bps to 6.9450%, and by 122bps to 7.00% on the 2045.
In the currency market, the exchange rate was unchanged at N379.00 at the official window, while the Naira weakened against the USD by 0.17% or 67 kobo to N394.67 at the I&E Window.
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Similarly, the Naira weakened slightly by N1 or 0.2% to N476.00 at the parallel market.
Market Swings Positive with Nigerian Treasury Bills, Negative on Bonds
