T-Bill Rate Tumbles as Bond Market Records Bullish Outing
The average yield on Nigerian Treasury Bill (T-Bill) falls to 6.6% as yields contracted 33 basis points on Monday. Following a slowdown in yields repricing in the fixed income market, bond secondary market activity was bullish as the average yield contracted by 6 basis points to 11.8%, Cordros Capital analysts stated in a market report.
As predicted by analysts at Atlass Portfolios Limited in a fixed income report for the month of June, 2021 yields repricing has slowed down partly as a result of 2 consecutive month inflation rate drops in April and May.
In the fixed income market, following a quiet trading activities last week, analysts explained that average yields contracted across the benchmark curve on Monday. It sheds 6 basis points at the short, a basis point at mid and 9 basis points at long segments due to demand.
It was noted that demand for JAN-2022 resulted in 35 basis points decline, MAR-2027 30 basis points drop and MAR-2050 bonds sheds 35 basis points respectively.
In the money market segment, analysts hinted that the overnight lending rate contracted by 375 basis points to 19.3% as there were no significant funding pressures on the system. Elsewhere, the open market operations (OMO) segment’s average yield expanded by 12 basis points to 9.9%.
The Nigerian Treasury Bill secondary market traded with bullish sentiment, as the average yield contracted by 33 basis points to 6.6%.
Across the curve, the average yield was flat at the short end but contracted at the mid (-32bps) and long (-53bps) segments following demand for the 199 day to maturity (DTM) (-55bps) and 304DTM (-106bps) bills, respectively.
In the currency market, the Nigerian local currency, naira, appreciated by 0.1% to N411.28 a dollar at the investors and exporters window but depreciated by 0.4% to N502.00 in the parallel market.
Last week, activities in the Nigerian Treasury Bills secondary market started off on a calm note with low volumes of trades witnessed across the curve, according to Afrinvest report.
The investment firm attributed this to tightened liquidity which was at N105.3 billion short as at Wednesday (from N21.3 billion negative on Monday). Consequently, average yield across the curve remained the same at 6.52%.
Specifically, Afrinvest stated that there were mild sell-offs at the shorter-end of the curve especially the 29-Jul-21 maturity, which inched northwards by 13 basis points week on week, while the mid- and long-term bills slightly dipped an average 1bp apiece.
“Going into the week, a total of N81.7 billion worth of maturing Nigerian Treasury Bills will be rolled over by the Apex Bank at the Primary Market Auction slated for Wednesday, 30th June, 2021 across the 91-, 182- and 364-Day tenors”.
“We expect the activity levels in the Nigerian Bills secondary market to improve due to improved liquidity levels in the financial system, which stood at N109.4bn long last Friday.
“Therefore, we advise investors to take advantage of the relatively attractive bills along the curve, while also remaining alert for more commercial paper offerings that might be announced”, Afrinvest said in the note.
Similarly, FGN bond secondary market resumed on a quiet note, as market players shifted focus to the bond PMA conducted last Wednesday.
As the week progressed, the market turned slightly bullish as investors took advantage of elevated yields levels in the market. Accordingly, average yield across all maturities dipped 7 basis points in the week to settle at 11.94% from 12.01% the previous week.
Specifically, analysts at Afrinvest stated that average yields on medium- and long-term bonds dipped 11 basis points and 14 basis points while the average yield in the short term bonds inched 3 basis points higher above the previous week.
Particularly, the instruments that recorded the most buying interest were the 18-Apr-37, 24-Jul-45 and 18-Mar-36 maturities, with yields contracting 63, 35, and 34 basis points respectively.
At the PMA that held on Wednesday, the Debt Management Office (DMO) total offer of N150.0 billion was met with strong demand, recording an overall subscription ratio of 1.3x.
Interestingly, the DMO sold more than it offered across the three maturities (MAR 2027, MAR 2035 and MAR 2050) in line with the Federal Government’s plan to further increase domestic borrowings, bringing total amount allotted to about N325.8 billion.
Furthermore, stop rates improved to 12.74% (-36bps), 13.50% (-50bps) and 13.70% was maintained at the MAR 2050 maturity.
T-Bill Rate Tumbles as Bond Market Records Bullish Outing
