CBN Sells N50 Bln OMO Bills at 7%, 8.5% and 10.10%
Spot rates on Open Market Operations (OMO) Bills were steady as the Central Bank of Nigeria (CBN) sold bills worth N50 billion at the primary market auction yesterday, the result shows.
CBN auction result indicates that Spot rates for short-dated OMO Bills printed at 7%, 8.5% for mid and 10.10% for long-dated. It was noted that the auction was oversubscribed amidst cautious trading sessions in the fixed income market.
However, there was duration apathy amidst improving macroeconomic data. Auction results from the apex bank show that investors favoured mid-tenored instruments.
In the New Year, investors have been positioning more heavily in the short to mid duration as the market expects implementation of borrowing plans by Nigeria’s Debt Management Office.
In 2021, from tepid opening levels, average rates on fixed interest instruments expanded by an average of 4%, according to Market data obtained by MarketForces Africa.
In the secondary market, the average yields on Treasury and OMO Bills ended flattish this week. Analysts see the yield curve remaining subdued until some sort of market catalysts surface given a healthy subscription level in the past primary market auctions.
In the money market, the average interbank rate which printed at 3.88% yesterday witnessed a steep increase on Friday due to liquidity pressures in the financial system.
The increase in money market rates, which appears to be heavy, was triggered by Central Bank FX retail auction debits.
Data from FMDQ Exchange shows that the overnight lending rate increased by 1050 basis points to close at 14.75 per cent as against the last close of 4.25 per cent.
Also, the Open Repo rate expanded steeply by 1050 basis points to close at 14.00 per cent compared to 3.50 per cent on the previous day.
The Treasury bills market remains relatively sluggish amidst investors’ cautious position. In the secondary market, the Nigerian T-Bills closed on a flat with the average yield across the curve remaining unchanged at 4.59 per cent.
Analysts said in separates note that average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.51 per cent, 4.12 per cent, and 5.29 per cent, respectively.
Similarly, the OMO bills market ended cold following a robust subscription at the primary market auction conducted by the CBN on Thursday.
In the secondary market for OMO Bills, the average yield across the curve steadies at 5.52 per cent. FSDH Capital note also shows that average yields across short-term and long-term maturities closed flat at 5.53 per cent and 5.52 per cent, respectively.
On Thursday, the CBN held an OMO auction where it sold bills worth ₦50.00 billion across the 96-day (₦10.00 billion), 180-day (₦10.00 billion), and 355-day (₦30.00 billion) tenors.
While the auction was steeply oversubscribed, the stop rates were unchanged at 7.00 per cent, 8.50 per cent, and 10.10 per cent, respectively.
CBN auction records a subscription level of 118 per cent (₦164.98 billion). FSDH Capital analyst hinted that demand was skewed towards medium tenor maturity bills with bid-to-cover ratios settling at 0.27x (96-day), 3.49x (180-day), and 3.44x (355-day).
Elsewhere, the Federal Government of Nigeria (FGN) bonds secondary market closed on a bullish line as the average bond yield across the curve cleared higher by 1 basis point to close at 11.91 per cent from 11.90 per cent on the previous day.
Explaining inverse relationship with the yield curve, bond prices slowdown. On the other hand, average yields across short tenor and long tenor of the curve increased by 4 basis points and 1 basis point, respectively.
However, the average yield across the medium tenor of the curve remained unchanged, according to analysts’ notes.
FSDH Capital stated that the 14-MAR-2024 maturity bond was the best performer with a decrease in the yield of 1 basis point, while the 27-APR-2023 maturity bond was the worst performer with an increase in yield of 13 basis points.
Going into next week, analysts are projecting that the secondary bond market is likely to remain subdued in the short term. # CBN Sells N50 Bln OMO Bills at 7%, 8.5% and 10.10%
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