Thursday, May 27, 2021 / 11:51 AM / by United Capital Research / Image Header Credit: iStock
Yesterday, the Central Bank of Nigeria held an NTB primary market auction offering N63.1bn worth of treasury bills to the market. Investor appetite for government paper remained strong, although most of the bids at the auction came in for the longer tenor paper, as the 91-day and 182-day bills posted subscription rates of 0.2x and 0.3x. However, demand for the longer-tenured bill was oversubscribed by 14.0x, in line with the recent trends at recent NTB auctions.
Stop rates for the 91-day, and 182-day bills remained unchanged at 2.5%, 3.5%, respectively. However, rates on the longer tenor paper, dipped by 10bps to close at 9.65%. Stop rates closed in line with our expectations, as we anticipated strong investor demand could drive stop rates lower, following observations from the last two auctions.
With regards, to the NTB secondary market, yesterday's auction results in combination with the recent CBN hold decision on monetary policy parameters could signal the beginning of a slowdown in upward yield reversals. We posit yield on the short end of the curve may have plateaued, although the long tenor instruments in the bonds market may have a little bit of room to go. For the equity market, a pause in the uptick in primary market stop rates could provide some support for the equity market in the near term, particularly considering the market is oversold.