Unimpressive Yields Could Fuel Santa Claus Rally on Nigerian Bourse
Unimpressive yields in the fixed income market could fuel “Santa Claus” rally on the Nigerian bourse in the last four trading week.
With Santa Claus around the corner, it is more likely to witness stocks to rally further after last week uptrend recorded on the Nigerian Stock Exchange.
In their separates market reports, analysts agreed that 2020 has been a tough year for investors in the fixed income space.
Yields on gilt-edged financial instruments have plunged to all-time lows amidst rising headline inflation rate.
As inflation rate widened to 14.89% for the month of November, negative return on fixed income market extended further.
WSTC Securities is hoping to see a sustained bullish trend amid an accommodative monetary policy stance.
“Consequent to expected low yields in the fixed-income markets, we posit a continued rally in the equities market”, analysts said.
Greenwich Trust explained that the fixed income market trailed in a bearish tone from the prior week.
Market data revealed that average yield rose to 2.1% from 1.9% in the prior week as major sell offs were observed in the Bond and OMO-bills markets.
Sentiments in the Nigerian Treasury bills market were mixed, according to Greenwich analysts.
Analysts hinted that investors’ cherry picked bills at the head to the belly of the T-bill market.
Meanwhile, Greenwich explained that profit taking held sway at the tail of the curve following worse than expected spot rate for the 364-day bill at the week’s Primary Market Auction (PMA).
Thereby, average yield in the Treasury-bills market eased by 5 basis points (bps) week on week to settle at 0.4% from 0.5% in the prior week.
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On the flip side, the OMO-bills market closed bearish following sell offs at the medium to long end of the curve while major bids at the short end of the curve could not offset the pessimism.
Consequently, average yield at the OMO-bills market soared for the week to 0.5% from 0.4%.
In its scheduled Primary Market Auction (PMA), the CBN rolled over maturing NT-bills worth NGN7.0bn across the 91DTM at 0.0480% (prev. 0.0100%), 182 day to maturity (DTM) at 0.5000% (prev. 0.0600%) and 364DTM at 0.1390% (prev. 0.3200%) for the 364DTM.
Average bid-to-cover ratio for the auction stood at 17.4x as investors scurried for the sparse bills offered in light of the prevailing robust liquidity witnessed in the market.
Also, money market rates remain in single digits, albeit spiked following settlement obligations following PMAs across the NT-bills, OMO-bills, and the Bond market.
Thus, the Overnight and Open Buy Back closed at 4.5% and 4.5% from 0.88% and 0.5% respectively in the prior week.
Greenwich analysts noted that as averseness intensified in the Bond Market, investors booked profit across the curve with market direction remaining uncertain in light of the CBN’s introduction of special bills and the better-than-expected marginal rates at the bond PMA in the week.
Consequently, average bond yield elevated by 62bps to 5.3% from 4.7% at the close of trading in the prior week.
The Debt Management Office (DMO) in its final PMA for the year sold bonds worth N30.0bn of N60.0bn offered across the 12.50% FGN MAR 2035 and the 9.80% FGN JUL 2045 papers.
It happened that bid range in the PMA widened as investors sought for more yields.
Consequently, the DMO sold the 12.50% FGN MAR 2035 and the 9.80% FGN JUL 2045 papers at 6.95% (prev. 5.00%) and 7.00% (prev. 5.79%) respectively.
“Forging ahead to the new week, we expect the uncertainty hovering around forward rates to continue to fuel bearish sentiments in the market as market players seek clarity going into the new year”, Greenwich Trust Limited stated.
Unimpressive Yields Could Fuel Santa Claus Rally on Nigerian Bourse
