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Treasury Bills: Yields forecast to trend higher after a bullish week of trading

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SAT 17 JULY, 2021-theGBJournal- Trading in the Treasury bills secondary market was bullish, as average yield across all instruments contracted by 30bps to 8.1% following improved system liquidity.

Across the market segments, the average yield at the OMO segment contracted by 57bps to 9.3%, given improved demand for these higher-yielding bills. The CBN sold NGN20.00 billion worth of OMO bills to market participants and maintained the stop rates across the three tenors, as with prior auctions.

Similarly, the average yield at the NTB segment contracted by 5bps to 6.7%, mirroring decline in the primary market and as participants sought to cover lost auction bids in the secondary market.

On Wednesday at its bi-weekly PMA, the CBN offered NGN109.52 billion for sale and eventually allotted NGN150.00 billion – NGN5.24 billion of the 91D, NGN7.60 billion of the 182D and NGN137.30 billion of the 364D bills with stop rates of 2.50% (previously 2.50%), 3.50% (previously 3.50%), and 8.67% (previously 9.15%), respectively.

With a subscription level of NGN574.68 billion, we highlight that this was the most subscribed auction this year (Bid cover ratio: 3.8x, previously 2.7x).       

In the coming week, we expect yields to trend higher as we expect a shortfall in system liquidity.

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