Average yield on T-Bills drops to 3.9%

Average yield on T-Bills drops to 3.9%

The Nigerian Treasury Bills market started off with panic sell-offs across the yield curve as investors reacted to the slump in oil prices amidst the global outbreak of COVID-19.

Thus, average yield across tenors dropped marginally to 3.9% from 4.0% the previous week.

Sell-offs persisted into the third trading session, albeit less aggressive, with investors trading cautiously ahead of the Primary Market Auction.

However, on Thursday, pockets of unfilled bids filtered into the market owing to improved system liquidity from OMO maturities of N223.7 billion coupled with no OMO auction sales by the CBN.

Analysts at Afrinvest observed that most of the demand were skewed to medium term maturities, particularly the 12-Nov-20 (-81bps), 29-Oct-20(-63bps) and 15-Oct-20(-63bps) instruments.

As a result, average yield across tenors dropped marginally to 3.9% from 4.0% the previous week.

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At the PMA, the Apex bank’s total offer of N86.3 billion across the 91-, 182- and 364-day tenors witnessed strong demand of N243.4bn, translating to a bid to cover ratio of 2.8x.

All tenors were oversubscribed with the short-term instrument enjoying the most buying interest at a bid-to-cover ratio of 13.2x with N1.8 billion offered compare to N23.7 billion subscribed.

However, the CBN only allotted the total amount offered across all tenors. Due to the oversubscription, stop rates on all instruments declined.

This week, system liquidity is expected to be bolstered by inflows from OMO maturities worth N304.8bn and we expect the CBN to conduct an auction to mop up excess liquidity.

In addition, the CBN is expected to conduct another PMA on Wednesday rolling over a total of N47.6bn.

Afrinvest expect the market to open on a quiet note as investors’ wait on the side-lines ahead of the PMA and release of the February Inflation data.

Nevertheless, the firm anticipates improved demand given the level of system liquidity of about N692.0 billion as at Friday as well as limited alternative options.

“Thus, we advise investors to trade cautiously while taking advantage of attractive opportunities along the yield curve, as well as expected Commercial Paper offers”, Afrinvest said.

Average yield on T-Bills drops to 3.9%