SAT 19 JUNE, 2021-theGBJournal- The Treasury bonds secondary market turned bullish, as the average yield declined by 27bps to 12.0%.
We attribute the drop to improved demand following the improving macroeconomic conditions as signalled by the second consecutive month of decline in inflation (May 2021 CPI: 17.93% vs April: 18.12%), reduced stop rates at the NTB auction albeit marginal, and (3) activities of short sellers rotating into long-dated bonds in anticipation of next week’s auction.
Across the curve, average yield at the mid (-37bps) and long (-45bps) segments contracted, as investors took positions in the JUL-2030 (-64bps) and JUL-2034 (-75bps) bonds, respectively. In contrast, investors continued to upwardly re-price short (+13bps) dated instruments, with major sell-offs recorded on the APR-2023 (+28bps) bond.
Next week, we expect the outcome of the bond auction to influence the direction of yields in the bonds secondary market. At the auction, the DMO will be offering instruments worth c. NGN150.00 billion through re-openings of the 16.2884% FGN MAR 2027, 12.50% FGN MAR 2035 and 12.98% FGN MAR 2050 bonds.
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