Afrinvest Says Maturing T-Bills Will Keep Money Market Rates Down

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Money Market Rates

Afrinvest Says Maturing T-Bills Will Keep Money Market Rates Down

Afrinvest, a Lagos based investment banking firm, has predicted that money market rates would stay low in the coming week.

The investment banking firm hinged the prediction on expectation of maturing open market (OMO) and treasury bills worth ₦352.8 billion and ₦90.9 million respectively.

The firm stated in the review that in the secondary T-bills market, performance was flattish as average yield remained at 3.2%.

“Yields on all instruments remained unchanged, indicating tepid demand during the week”, analysts explainedMoney Market Rates

“We expect maturities of OMO and T-bills instruments worth ₦352.8 billion and ₦90.9 million respectively to keep money market rates low in the coming week”, Afrinvest stated

Despite a moderation in system liquidity on Monday to ₦118.7 billion compare to ₦382.4 billion last week Friday, the open buy back (OBB) and overnight (OVN) rates opened the week lower.

The rates opened at 14.5% and 15.4% respectively compare to last week’s close of 15.6% and 16.7%.

On Tuesday, the OBB and OVN rates remained flat despite weaker system liquidity at ₦107.4 billion.

On Wednesday however, the OBB and OVN rates fell to 13.0% and 14.1% respectively, reflecting an increase in system liquidity to ₦139.2 billion.

Finally, the week closed on Thursday with the OBB and OVN rates settling lower at 8.8% and 9.8% respectively as system liquidity closed higher at ₦187 billion.

On Wednesday, the apex bank conducted a primary market auction, offering a total of ₦90.9 billion across the 91-day, 182-day and 364-day  instruments.

The value were ₦1.8 billion for 91-day,  ₦4.5 billion for 182-day and ₦84.6 billion for 364-day.

Overall, the auction was oversubscribed at a bid to offer ratio of 1.9x, Afrinvest stated in a note.

Foreign Investors Shy Away from CBN’s OMO Auction

The investment firm explained that demand was strongest in the shorter end as offer was oversubscribed by 12.0x.

In the same vein, Afrinvest said the 182-day and 364-day instruments received subscriptions exceeding offers by 9.0x and 1.4x respectively.

Total sale stood at ₦90.9 billion while marginal rates declined across board to 2.00%, 2.20% and 4.02% from 2.45%, 2.72% and 4.02% for the 91-day, 182-days and 364-days instrument respectively.

This represents a decline of 32 basis points (bps) as average rates fell to 2.74% from 3.06% recorded in the previous auction.

On Thursday, the CBN offered a total of ₦60 billion worth of OMO securities across the 89-day , 180-day and 348-day  instruments.

The value of the securities were at ₦5 billion for 89-day, ₦5 billion for 180-day and ₦50 billion for 348-day.

Afrinvest said the auction was oversubscribed at 1.13x.

The shorter-dated instrument recorded the highest bid to offer ratio at 2.2x while the 180-day and 348-days securities were also oversubscribed at 1.1x and 1.03x respectively.

Instruments worth ₦60 billion were sold and the closing rates remained the same as the previous auction at 4.95%, 7.79% and 8.99% for the 89-day, 180-day and 348-day instruments respectively.

Afrinvest Says Maturing T-Bills Will Keep Money Market Rates Down