Analysts expect limited investor activities in OMO, T-bills, aggressive buys in bond
Naira stays calm barring shocks as CBN intensifies intervention
ALTHOUGH FIXED income analysts expect to see limited activity across the OMO and Nigerian Treasury Bills markets, the fixed income market experienced a flurry of activity last week with the bears dominating the early sessions, while the bulls gained charge in the last two trading days of the week.
In the bonds space, aggressive sell-side activities at the start of the week, was counterbalanced by buy-side action at the latter stages as average yield on benchmark bonds closed flat week on week. Moving to the Nigerian Treasury Bills space, sell-side action on the 359 date-tomaturity saw yields rising 6 basis points on average while the OMO maturities market saw yields ending the week flat.
As for the expectations of market analysts for this week, Vetiva Capital Research experts say, “We believe investor sentiment last week was driven by the primary NTB auction results, where the Central Bank raised stop rates at the mid-long end of the curve. For the bonds market, whilst we expect last week’s auctions to guide investor sentiment this week, we do not rule out the possibility of another round of buy-side action in the space. And, given yield levels in the OMO space, we can expect to see pockets of buy-side action this week.”
In the money market, at the close of last week, system liquidity was positive at N370.70 billion as it increased from its previous balance of N293.90 billion with Overnight (O/N) rate increasing by 5.67 percent to close at 10.67 percent, as against the last close of 5 percent. The Open Repo (OPR) rate also increased by 5.67 percent to close at 10.17 percent compared to 4.50 percent on the previous day.
And across on the foreign exchange market, the naira lost strength by N0.46 per dollar at the Investors & Exporters’ FX market, depreciating by 0.11 percent as the dollar was quoted at N416.63 as against the last close of N416.17 as most participants maintained bids of between N410 per dollar and N444 per dollar. Meanwhile, at the parallel market, it further depreciated to N578 per dollar from N577.61 per dollar the previous day.
On the Nigerian Treasury Bills secondary market, it was a mild but negative close as the NTB 9-Mar-23 (+16 basis points) maturity bill witnessed selling pressure with the average yield across the curve increasing by one basis point to 3.29 percent from 3.28 percent on the previous day. The average yields across the long-term maturities expanded by three basis points. However, the average yields across short-term and medium-term maturities remained unchanged at 2.70 percent and 3.05 percent, in that order, while the yields on 10 bills remained unchanged.
Further into the OMO bills market, the average yield across the curve closed flat at 3.42 percent. Average yields across short-term, mediumterm, and long-term maturities remained unchanged at 3.02 percent, 3.28 percent, and 3.69 percent, respectively.
In addition, the CBN on Thursday, held an OMO auction, selling bills worth N50 billion across the 110-day (N10 billion), 194-day (N10 billion), and 362-day (N30 billion) tenors with the stop rates remaining unchanged at 7 percent, 8.50 percent, and 10.10 percent, respectively. The auction was oversubscribed, indicating a subscription level of 665 percent (N332.67 billion). Though, the demand was tilted towards long tenor maturity bills with bid-to-cover ratios settling at 4.99x (110-day), 5.48x (194-day), and 7.60x (362-day).
Meanwhile, the FGN bonds secondary market closed the week on a mildly positive note following buying interests across the short (-1bp) and long (-37bps) ends of the market, as the average bond yield across the curve cleared lower by 4 basis points to close at 10.67 percent from 10.71 percent on the previous day. Average yields across short tenor and long tenor of the curve compressed by 18 basis points and 2 basis points, respectively. However, the average yield across the medium tenor of the curve remained unchanged. The 14-MAR-2024 maturity bond was the best performer with a decrease in the yield of 37 basis points.