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BONDS: Average yield expands by 61bps to 5.4% as investors react to higher marginal rates at the PMA

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SAT, 19 DEC, 2020-theGBJournal- The Treasury bonds secondary market remained bearish, as investors reacted to the November inflation figure (14.89%) and the higher marginal rates at the bond PMA. Consequently, average yield expanded by 61bps to 5.4%.

Most of the activity in the bonds space this week occurred at the primary market, where the DMO hosted its last FGN bond auction of the year.

At the PMA, the DMO offered instruments worth NGN60.00 billion to investors through re-openings of the 12.50% MAR 2035 (Bid-to-offer: 3.0x; Stop rate: 6.9450%) and 9.80% MAR 2050 (Bid-to-offer: 1.4x; Stop rate: 7.0000%).

Total subscription amounted to N134.06 billion, with the DMO eventually allotted instruments worth N30.00 billion, resulting in a bid-cover ratio of 4.5x. Rates at the auction closed higher by 158bps on average compared to the previous auction.

The Treasury bonds secondary market is forecast to continue to trade with bearish sentiments, as investors round up their investing activity for the year.

Also, the Treasury bills secondary market is expected to remain in a lull, as investors remain wary of the low yields on offer.

Trading activity in the Treasury bills secondary market was mixed, as average yield across all instruments was flat at 0.4%.

The average yield expanded by 5bps to 0.5% at the OMO segment, as investors positioned for a renewed supply from the CBN at Thursday’s OMO auction. Conversely, the average yield contracted by 5bps to 0.4% at the NTB segment, as market participants covered for lost bids at Wednesday’s NTB PMA.

At the PMA, the CBN offered bills worth N7.00 billion with allotments of N1.50 billion of the 91-day, N1.70 billion of the 182-day and N3.80 billion of the 364-day – at respective stop rates of 0.0480% (previously 0.01%), 0.5000% (previously 0.60%), and 1.1390% (previously 3.20%).

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