Traders Sideline T-Bills ahead of CBN Auction, Naira Gains
Ahead of the Central Bank of Nigeria (CBN) primary market auction, the average yield on fixed income instruments ended on a flattish note after thin trading on Nigerian Treasury Bills was recorded in the secondary market.
Meanwhile, transactions on Federal Government (FGN) bonds also ended warm. On Wednesday, the apex will hold a Treasury Bills (T-Bills) Primary Market Auction where existing bills totalling N141.26 billion will mature, and rollover.
The maturing bills include 91-day bills worth N2.19 billion, 182-day bills worth N6.95 billion and 364-day bills at N132.12 billion. At the next auction, Meristem Limited hinted about the firm expectation that rates will increase across all instruments on offer.
“We note that the level of liquidity this quarter -feeding off incoming maturing bills and coupon payments- compared to the previous quarter has declined. We also consider that the Government is willing to raise higher amounts than it did in the preceding quarter, thus making a compelling case for an increase in stop rates”, Meristem Securities said in a note.
However, analysts said they are expecting a marginal rate increase on the 91-day instrument relative to other instruments on offer.
“In our opinion, Federal Government is more tilted towards the medium and long term instruments. The Government’s perceived preference for these instruments is indicative of increased pressure of high debt burden on government finances which is not expected to ease off any time soon”.
Today, the naira regained value in the investors’ and exporters’ foreign exchange window. After hitting N417 to a greenback on Monday, the Nigerian local currency appreciated by 0.1% to N416.63 at the official FX window today, according to data from FMDQ Exchange.
In the money market, short term rates adjusted downward as the financial system liquidity was boasted with inflow from maturing instruments. The overnight lending rate contracted by 263 basis points to 5.6% as N48.47 billion inflow from open market operations (OMO bills) maturities lifted the financial system’s liquidity position.
At the Nigerian Treasury bills segment, trading activities were mixed as market participants stayed on the sidelines in anticipation of Wednesday’s auction results. Thus, the average yield stayed flat at 3.3%. Similarly, the average yield was unchanged at 3.6% in the OMO market, traders note from Cordros Capital shows.
In the bond secondary market, trading activities ended on a mixed note, according to traders albeit with a bullish bias. The average yield pared by a basis point to 10.9%.
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Across the benchmark curve, Cordros Capital said the average yield pared at the short (-1bp) and long (-1bp) ends as investors demanded the APR-2023 (-2bps) and APR-2037 (-11bps) bonds, respectively.
Conversely, the average yield was flat at the mid-segment, according to analysts’ notes. #Traders Sideline T-Bills ahead of CBN Auction, Naira Gains

