Investors appear happier with long-term instruments with the 364-day treasury bill instrument being the most sought after last week. This is interest rates slowed reasonably as liquidity increases by last weekend.
The Central Bank of Nigeria (CBN) conducted Open Market Operations (OMO) auction worth N100.0 billion last week Thursday, below same day’s maturity.
There was no demand for the short and medium term instruments, while the 362-day (Offer: ₦80.0 billion; Subscription: N112.1 billion; Sales: ₦110.5 billion) instrument was oversubscribed with a bid-to-cover ratio of 1.4x at a marginal rate of 12.99 per cent (down 1bps from last auction).
There were sell-offs in the T-bills segment, resulting in a bearish performance in the secondary market as average rate advanced 40bps w/w to 4.2 per cent. The 364-day instruments saw the most sell pressure with yields climbing 80bps. Similarly, rates on the 182- day instrument rose 40bps while the 91-day instrument closed flat.
At the money market, as system liquidity printed at N266.2 billion at the start of the week, the Open Buy Back (OBB) and Over Night (OVN) rates opened at 14.8 per cent and 15.6 per cent respectively, lower than last week’s close of 15.5 per cent and 16.4 per cent. By the close of the week, the OBB and OVN rates printed at 11.7 per cent and 12.9 per cent respectively as system liquidity settled at N406.1 billion.
“This week, we expect maturities worth N1.0 billion and N86.3 million from OMO and T-bills markets to hit the system. As such, we see rates trending lower in the week ahead. Also, we expect the CBN to continue its liquidity mop-up via OMO sales, said Afrinvest.
Bonds market: Sell pressures dominates activity as COVID-19 fears mount
The domestic bonds market posted a negative performance last week as average yield across tenors advanced 100 basis points (bps) w/w to 10.2 per cent. As expected, the market reacted negatively to the spread of the COVID-19 into Nigeria and weaker oil prices. Consequently, average yield appreciated on all trading days with the highest sell-offs recorded on Friday (+52bps). At the mid-end, bonds witnessed the most sell-offs, rising 126bps w-o-w in yields while the short-end bonds trailed closely, appreciating 104bps on average. Lastly, there were sell-offs on the long-end notes as yields advanced 52bps week-on-week (w/w).
In the Sub Saharan Africa (SSA) Eurobonds segment, there was a bearish performance across board with average yield climbing 23bps w/w. The SOUTH AFRICA 2022 instrument saw the most increase in yields (+415 bps w/w) as it approaches maturity (09/03/2020). All ZAMBIAN instruments (2022, 2024 and 2027) recorded sell-offs as their respective yields advanced 65bps, 38bps and 24bps w/w. Conversely, the KENYA 2030 and IVORY COAST 2022 led gainers, as yields declined 18bps w/w apiece.
For the African Corporate Eurobonds that we track, performance was positive as average yields declined 17bps w/w. The SIBANYE GOLD 2023 and ESKOM HOLDINGS 2021 instruments led the pack with yields declining 324bps and 59bps w/w respectively. On the other hand, the BAYPORT MGT 2022 and ACCESS BANK 2021 led the laggards with yields up 60bps and 26bps w/w respectively. We expect developments from OPEC+ meeting and monetary easing by central banks in advanced economies to shape the sentiment towards these asset over the coming weeks.
