Culled—Proshare
December 2019/IMFBlog
By Afrinvest Research
Last week, the Nigerian Treasury Bills (“NT-Bills”) secondary market which traded for 3-days due to the Yuletide holidays extended its bullish run on the back of sustained demand by local Investors, buoyed by OMO maturity worth N900.0bn hitting the financial system during the week. Consequently, demand intensified as local investors continue to face limited money market instruments to reinvest maturing funds.
Thus, NT-Bills average yield was further pressured as it shed 22bps to settle at 5.6% W-o-W relative to average yield on OMO bills which settled 13.1% W-o-W.
In a bid to mop liquidity from maturities last week, the Apex Bank sold OMO bills worth of N250.0bn for the 361-Day tenor at a stop rate of 13.28% while there was “No sale” on the short and medium dated instrument.
Going into the week, we expect to see an improvement in system liquidity (N425.7bn long as at Tuesday) as N331.05bn worth of OMO and N74.83bn worth of NT-Bills maturities would hit the financial system. Accordingly, we expect the CBN to intervene by mopping up excess liquidity via an OMO auction-opened to only Banks and Foreign Investors. Investors are therefore advised to take advantage of NT-Bills with attractive yields across the curve and short-term bonds (2-3years TTM).
FGN Bonds Market Update: Bearish Sentiments Reversed as Average Yield Dips by 24 bps W-o-W
Similarly, the bulls took the center stage at the domestic bond market as average yield slipped 24 bps on the back of local investors hunt for double digits yields in the market. The market continues to enjoy buying interest as investors continue to take position, especially in the attractive short dated bond instruments.
As a result, average yield settled at 10.8% W-o-W. The 15-JUL-21 (-96bps) Instrument enjoyed most buying interest, trailed by 27-APR-23 (-89 bps) and 13-FEB-20 (-84 bps) respectively. On the flip side, the 18-MAR-36 (+60bps) suffered the most selloffs.
We anticipate a sustained bullish momentum in the bonds market especially in the short and medium instruments as local investors continue to seek alternatives to reinvest maturing OMO bills. Thus, investors are advised take advantage of instruments with attractive yield.
