On a side note, average yields on Nigerian government bonds continued to fall as investors stepped up their purchases of banknotes, leading to lower yields despite higher headline inflation and lower stop rates. High inflation generally reduces the bond market’s real return on capital.
The government bond market ended the week calmly, although most secondary market participants traded cautiously. Fund/wealth managers were eyeing Wednesday’s main auction, which was noted as CBN offered 34.54 billion Naira worth of Nigerian government bonds.
The supply was split into Naira 1.01 billion for 91 days, Naira 1.29 billion for 182 days and Naira 32.15 billion for 364 days. Futureview analysts said in an investor note over the weekend that the stop rate for Apex Bank’s auction of Nigerian treasury bills in June had fallen.
Cordros Capital Limited said in a letter to investors that the previous auction closed at N830.19 billion with a total offer of N286.13 billion, with demand concentrated in longer-term bonds. informed investors.
Fixed income analysts reported that the June 14, 2023 primary market auction saw a large volume of subscriptions with maturities of 182 days and 364 days, resulting in lower stop rates. Compared to the previous auction, the stop rate on the 182nd fell to 5.12% and 8.24% on the 364th, but rose slightly to 4.89% on the 91st.
The 182-day and 364-day subscriptions received offers of Naira 7.27 billion and Naira 277.27 billion respectively, with sales of Naira 1.28 billion and Naira 277.27 billion respectively, according to CBN auction results. rice field. .
The 91-day price was slightly oversubscribed at 1.58 billion naira against the offering price of 1.1 billion naira. Analysts at Futureview said strong demand for short-term financial products is likely to continue amid persistent signs of high inflation.
A short-term reference rate applies to the money market.
Overnight interest rates ended flat at 12.1% as there were no major inflows into the financial system. The average liquidity level thus ended at 233.86 billion naira for net long positions compared to 543.14 billion naira for net long positions in the previous week.
Futureview expects overnight rates to rise as analysts expect tensions in FGN bond auctions next week and the possibility of a CRR to weigh on liquidity in the system.
