- As Naira pares N0.67 loss w/w
Trading was largely mixed across the fixed income space last week with yields declining in the Nigerian Treasury Bills and OMO bills markets, while sell-offs stuck out in the bonds segment.
For the weekly roundup, sell-side activity ruled the curve in the bonds space and as a result, the average yield advanced nine basis points from the previous week.
On the other hand, in the Nigerian Treasury Bills segment, investors bought tenors across the mid-long end of the curve. Accordingly, yields across the space declined 22 basis points week on week on the average.
To end with the weekly roundup, players actively hunted for bargains in the OMO market, with investors primarily playing at the short and long ends of the curve causing average yields to moderate seven basis points week on week.
For fixed-income analysts, the current bullish sentiment is expected to drive activity in the Nigerian Treasury Bills market, and given the absence of market catalysts, a similar trading pattern is anticipated as weak activity in the bonds segment continues.
At the close of the week, Overnight (O/N) money rate increased by 12.67 percent to close at 15.67 percent, against the last close of three percent, and the Open Buy Back (OBB) rate also increased by 12.67 percent to close at 15 percent, compared to 2.33 percent on the previous day.
Money market rates increased by an average of 1267 basis points following the FX retail auction by the CBN during the week as system liquidity increased to N226.74 billion from N76.66 billion.
Into the foreign exchange market, the Nigerian Naira lost N0.67 week on week to close at N415.07 to the dollar at the Investors’ & Exporters’ FX market, while the CBN Naira official rate remained at N411.63 for the greenback as most participants maintained bids at between N406 per dollar and N452.56 per dollar.
Meanwhile, as the CBN maintains interventions in the FX market, the naira is expected to remain largely stable across the various windows of the currency space, analysts say.
The Nigerian treasury bills secondary market saw a positive close with average yield across the curve decreasing by six basis points to close at 4.85 percent from 4.91 percent that was recorded on the previous close. The bullish outing was spurred by lower yields across the intermediate segment. The average yields across the medium-term maturities declined by 17 basis points. However, the average yields across short-term and long-term maturities remained unchanged at 3.52 percent and 5.81 percent, respectively. The NTB 12-May-22 (-104 bps) maturity bill witnessed heavy buying interest, while yields on 19 bills remained unchanged.
At the recent Nigerian Treasury Bills primary market auction (PMA) by the CBN on Wednesday, the apex bank offered bills worth N118.73 billion across the 91-day tenor for N3.54 billion, 182-day tenor for N4.12 billion, and then the 364-day maturity for N111.07 billion as it oversold bills, allotting N215.7 billion worth of bills as against the N118.7 billion on offer.
Meanwhile, the stop rates for the 91-day and 182-day bills remained unchanged at 2.5 percent, 3.5 percent, respectively, as was reported at the last session, but rates on the longer tenor paper moderated for the fourth consecutive auction by 61 basis points to close at 5.89 percent.
OMO Bills Market
In the OMO bills market, the average yield across the curve closed flat at 5.50 percent as market activities remained muted across the yield curve. Average yields across short-term, medium-term, and long-term maturities remained unchanged at 5.36 percent, 5.54 percent, and 6.15 percent, respectively. Furthermore, the CBN held an OMO auction on Thursday, selling bills worth N30 billion across the 117-day (N5 billion), 187-day (N5 billion), and 341-day (N20 billion) tenors with the stop rates remaining unchanged at 7 percent, 8.50 percent, and 10.10 percent, respectively. The auction was oversubscribed, indicating a subscription level of 476 percent at N142.78 billion. Also, demand was tilted towards long tenor maturity bills with bid-to-cover ratios settling at 3.20x (117-day), 4.10x (187-day), and 5.31x (341-day).
Meanwhile, trades settled bearish as yields on the mid and short end of the curves remained unchanged, while the short end declined at the FGN bonds secondary market last week; as the average bond yield across the curve closed flat at 8.17 percent. Average yields across the short tenor and medium tenor of the curve remained unchanged, while the average yields across the long tenor of the curve declined by one basis point. The 27-MAR-2050 maturity bond was the best performer with a decrease in the yield of 6 bps, while the FGNSB 12-FEB-2022 bond was the worst performer with an increase in yield of 3 bps.