Unattractive yields: investors wait on sideline

With average yields declining despite increased in headline inflation, analysts at Afrinvest  said local investors are waiting on the sideline due to unattractive yields.

Analysts however remark that local investors are holding for slightly more attractive medium-long-term offers at the Primary Market Auction this Wednesday.

In its note, Afrinvest said the performance in the Nigerian Treasury Bills secondary market last week turned bearish.

Analysts at the firm said they saw some local investors sell-off their Nigerian Treasury-Bills ahead of the FGN bond auction last Wednesday, while other locals stood on the sidelines, indifferent, amid unattractive secondary market offerings.

Consequently, average yield on all instruments trended 7 basis points (bps) northwards week on week to close at 3.9%.


Meanwhile, long and short-term bills suffered selloffs advancing 1.0% and 0.3% respectively.

On the flipside, the medium-term NT-Bills dipped 14 bps as slight buying interest persisted.

Afrinvest said the Apex bank conducted the usual Open Market Operation auction last week mopping up N300 billion of the excess liquidity in the financial system (N1.2tn from all maturing investments NT-Bills, OMO and FGN bond).

As expected, due to high demand, stop rates compressed slightly by 2 bps and 1 bp on the 362-Day, 180-Day tenors to close at 13.02% and 11.59% respectively while, the 89-Day instrument closed at 11.45% from a “No-Sale” at the previous auction.

Looking ahead, investors anticipate a Primary Market Auction this Wednesday, where the Central Bank of Nigeria  is scheduled to rollover maturing NT-Bills worth N111.1 billion.

“We believe will be significantly over subscribed due to expected buoyant liquidity on OMO and NT-Bills maturities worth N1.1 trillion and unattractive secondary market alternatives”, Afrinvest said.

Analysts thus predict that there will be a slight moderation in stop rates and high over-subscription.

Afrinvest said: “This week, we foresee quiet trading sessions at the start of the week – despite liquidity levels of N178.5 billion long as at Friday and expected combined maturing investments of N1.1 trillion – as locals hold for slightly more attractive medium-long-term offers at the PMA”.

Read also: CBN injects $292.34 million into retail Secondary Market

Afrinvest advised local investors to either take position during the first few soft trading sessions in attractive secondary market NT-Bills that witnessed sell offs last week or position at expected primary offerings.

Unattractive yields: investors wait on sideline, hold for medium-long term instruments by Julius Alagbe

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