T-bills appetite expands as secondary market goes bullish

Charles Abuede

OPEN BUY BACK (OBB) and Overnight (OVN) money rates opened last week at 1.4 per cent and 2.3 per cent respectively from the previous week’s close of 1.6 per cent and 2.3 per cent as system liquidity fell to N737.7 billion. On September 9, OBB and OVN rates rose to 1.5 per cent and 2.4 per cent respectively as system liquidity decreased to N480.9 billion.

By the close of the week, OBB and OVN rates surged to 14.5 per cent and 16.5 per cent respectively as system liquidity settled at N632 billion. In line with Central Bank of Nigeria’s scheduled line up last week, the apex bank conducted T-bills sales worth N128.1 billion on Wednesday, N20 million lower than the same day’s maturity.

Demand was strong across board with a bid-to-cover ratio of 2.0x, 1.6x, and 2.1x for the 91, 182 and 364-day instruments respectively. Stop rates continue to dip at 1.1 per cent, 1.6 per cent and 3.1 per cent (vs 1.2%, 1.8% and 3.3% in the previous auction) for the 91-day, 182-day, and 364-day instruments respectively. Consequently, the CBN auctioned OMO instruments worth N70 billion on Thursday, lower than the same day’s maturity of N247.4 billion. Demand was strong as the 75-day (Offer: N10.0bn; Subscription: N12.0bn; Sale: N10.0bn), 180-day (Offer: N10.0bn; Subscription: N35.3bn; Sale:N10.0bn) and 355-day (Offer: N50.0bn; Subscription: N216.8bn; Sale: N50.0bn) instruments were oversubscribed at 1.2x, 3.5x and 4.3x with marginal rates of 4.9 per cent, 7.7 per cent, and 8.9 per cent respectively. Meanwhile, in the secondary T-bills market, there was a bullish outing as the average rate declined 17 basis point (bps) week on week to 1.8 per cent. Investors sold-off the 91- day instrument resulting in rates advancing 38bps while the 182 and 364-day instruments saw high demand as the yields dropped 30bps and 59bps, respectively.

The domestic bonds market ended the week on a bullish note as average yield fell 42bps to 7.5 per cent following buy interest on all trading days. The bullish sentiment was driven by demand from investors seeking to take position ahead of the bond coupon payment amounting to N191.7 billion in the subsequent weeks. The short-term instrument recorded the most buying interest as the average yield declined 1.2 per cent week on week. Trailing, average yield on the long and medium-term instruments dipped 22bps and 11bps from the previous week respectively.

However, across the SSA Eurobonds space, sell pressures dragged performance and average yield rose 15bps week on week to 8.3 per cent. The NIGERIAN 2027, GHANA 2022 and GABON 2024 instruments recorded the most sell-offs as the respective yields increased 33bps from the previous week.
Trailing, yields on the NIGERIAN 2038 and 2047 instruments rose 32bps and 30bps week on week respectively. At the African Corporate Eurobonds market, performance was positive as average yield dipped 14bps to 4.5 week on week. The SIBANYE GOLD 2023 and GROWTHPOINT PROPERTIES LIMITED 2023 instruments posted a bullish performance as yields declined 220bps and 34bps respectively.