Treasury Bills Sales Decline as CBN Slashes Spot Rates
Spot rates on Nigerian Treasury bills (CBN) declined as demand faltered due to robust liquidity in the financial system at the time when the apex bank conducted its midweek primary market auction.
Thus, trading activities in the secondary market were relatively quiet, as market players took their bids to the Central Bank of Nigeria (CBN) Primary Market Auction. A slowdown in transactions kept yields chained except for the segment that saw a moderated bullish trend.
At the auction conducted yesterday, the CBN rolled over ₦143.98 billion across the three maturities on offer. Results posted on the CBN website showed that subscription levels came in strong (5.7x), supported by surplus liquidity in the system.
MarketForces Africa gathered that a 5.70x bid-to-cover ratio was a decline when compared to 6.23x at the prior auction. Analysts noted that 182-day bills saw the highest demand (7.71x), followed by the 364-day (5.64x) and the 91-day bill (5.13x).
As a result, stop rates on 91-day, 182-day and 364-day bills cleared 80 basis points, 156 basis points and 118 basis points lower.
Auction results showed that the stop rates for the 91-day, 182-day, and 364-day bills moderated to 4.55% (from 5.30%), 6.44% (from 8.00%), and 8.99% (from 10.17%), respectively, due to improved liquidity conditions.
“In the near term, we expect unmet bids and excess liquidity in the system to exert pressure on secondary market yields”, TrustBanc Capital Limited told investors in a note.
Liquidity in the system improved by 23% to close at ₦721.54 billion on Wednesday. Although, the overnight lending rate inched higher by 5 basis points to close at 11.38%.
Data from FMDQ Exchange showed that the open repo rate held firm at 11.00% in the absence of funding pressures.
“In the near term, we expect retail SMIS refund to lift system liquidity further, given that maturing treasury bills will offset the auction debit scheduled for tomorrow”, analysts said.
The average secondary market yield on T-bills moderated to 7.24% in tandem with declining marginal rates at the primary market. #Treasury Bills Sales Decline as CBN Slashes Spot Rates Naira Steadies as Banks Issue Update on FX Purchase
