Bearish sentiment resurfaces in secondary T-bills market despite stable oil prices
Analysts expect mixed sentiments in domestic market
IN THE SEC ONDARY T BILLS MARKET, bearish momentum resurfaced as average yield closed higher by 6 basis points week on the week to 2.0%. While the yield at the longer end was flat at 2.9 per cent, the short-term instrument recorded a mild gain as yield moderated 1 basis point week on week to 1.2%.
On the other hand, there were sell-offs in the medium term instrument with average yield climbing 18 basis points week on week to 2.0%.
The open buy-back (OBB) and overnight (OVN) rates opened the week higher at 13.3% and 14.3% respectively, although system liquidity rose slightly to N778.0 billion (vs. 769.2 billion as at July ending). However, both the OBB and OVN rates declined to 8.5 percent and 9.3 percent respectively on Wednesday while system liquidity plunged to 195.8 billion. At the close of the week, the OBB and OVN rates came in at 6.3 percent and 7.2 percent respectively with system liquidity settling at 220.7 billion.
As a result of the tight system liquidity towards the end of the week, the CBN did not conduct any auction last week. However, given the apex bank’s management of system liquidity, analysts expect money market rates to trade at a similar range in the coming week despite maturing Tbills and OMO instruments worth 56.7 billion and
89.0 million respectively.
Bond market bulls take 40 winks
Following successive weeks of stellar demand, profit-taking in the secondary market forced trading to close the week bearish. As a result, average yield spiked 73 basis points week on week to 7.6 percent following sell-offs on 4 of 5 trading sessions. Across tenors, the long-term notes recorded the most sell pressures with yields rising 112 basis points week on week. Similarly, the mid and short-term instruments recorded 82 basis
points and 11 basis points rise in yields respectively. At the sub-Saharan Africa (SSA) Eurobond market, investors continued to cherry-pick attractive instruments as average yields declined 11 basis points week on week to settle at 8.5 percent. The NIGERIA 2025 and 2031 instruments enjoyed the highest demand, shedding 39 basis points and 38 basis points week on week respectively.
Similarly, the GHANA 2030 and lVORY COAST 2031 instruments recorded gains as yields fell by 22bps and 14bps respectively. Conversely, yields on the ZAMBIA 2022 rose by 11 basis points week on week to lead the losers while the KENYA 2028 and 2048 instruments trailed with 4bps week on week increase apiece.
For the African Corporate Eurobonds, the bullish streak persisted as average yields declined by 9 basis points week on week to close at 5.0 percent. The UNITED BANK OF AFRICA 2022 and NEERG ENERGY 2022 instruments were the best performers as their respective yields fell 39bps and 22bps. On the flip side, the ESKOM HOLDING 2023 and 2025 bonds led laggards with yields expanding 147bps and 16bps week on week in that order.
Verdict: Market analysts at Afrinvest Research expect sentiments in the domestic market to be mixed in this. However, the sustained demand in the Eurobond market is highly anticipated as global oil prices remain stable.