SAT 13 FEB, 2021-theGBJournal- In line with our expectation, proceedings in the Treasury bonds secondary market were bearish, as investors priced in the higher yields at the Treasury bills market, with the expectation of a similar outturn in the bonds market.
Against the foregoing, average yield expanded by 104bps to 9.0%. Across the benchmark curve, average yield expanded at the short (+114bps), mid (+160bps) and long (+30bps) segments, as investors sold off the MAR-2025 (+179bps), NOV-2029 (+173bps) and MAR-2036 (+61bps) bonds, respectively.
In the coming week, we expect the outcome of the auction to influence the direction of yields in the bonds secondary market.
At the auction, the DMO is set to offer instruments worth NGN150.00 billion through re-openings of the 16.2884% FGN MAR 2027, 12.50% FGN MAR 2035 and 9.80% FGN JUL 2045 bonds. We expect the auction to be oversubscribed, with market participants making aggressive bids in line with the higher stop rates at the most recent OMO and NTB auctions.
In Q1-21, we note that there is a strong case for tempered yields in the bonds secondary market, given the limited supply amidst significant inflows from CBN special bill maturities (c. NGN4.00 trillion) and FGN bond coupon payments (c. NGN500.00 billion).-With Cordros Research