Government will seek to raise ¢1.17 billion in this week's Treasury bill auction to refinance the upcoming T-bill maturities of ¢1.08 billion.

In the T-bill auction last week, the government secured ¢1.98 billion, missing its target marginally. Although last week's auction marked the fifth successive under subscription, the government exceeded its refinancing obligation as demand improved over the previous auction.

The surge in inflation is likely to push yields further up. Headline inflation hit 40.40% in October 2022, further widening the negative return spread on money market yields.

With inflation likely to continue its uptrend next month, investors are expected to seek a higher premium to curtail inflation losses.

On the other hand, yields still went up across the T-bill curve as the yield of the 91-day bill cleared at 34.39% (+105 basis points). The yields on the 182-day and 364-day tenors went up to 35.50% (+65 basis points) and 35.08% (+28 basis points), respectively.

Secondary bond market witness a slowdown

The secondary bond market witnessed a slowdown last week as total face traded amounted to ¢2.95bn, representing a 17.51% week-on-week decline.

Tight liquidity conditions hampered trading activity as the market remained net offered.

According to reports, investors mainly traded on the front end of the yield curve, as 62% of trades were executed along the 2022-2025 maturities, with yields widening by an average of 2% on the yield curve.