CBN Effort to Sterilise Maturing Bills Will Drive Uptick in Treasury Rate
Godwin Emefiele, CBN Governor

CBN Effort to Sterilise Maturing Bills Will Drive Uptick in Treasury Rate

The Central Bank of Nigeria (CBN) effort to sterilise maturing bills will drive an uptick in treasury bills rate, analysts have said after noting that sentiments were mostly mixed across the different segments of the fixed income market last week.

On the front end, the Nigerian Treasury bill benchmark curve expanded by 0.10% week on week to 6.14%, as funding conditions remained largely constrained.

To put in proper context, analysts said the market had been relatively quiet, especially at the start of the week, before it eventually regained momentum on Thursday, mostly driven by the CBN’s primary market auction (PMA) of N179.3 billion, a move that effectively took out the N91.3 billion T-Bill maturity.

Meanwhile, the open market operations (OMO) benchmark curve compressed by 22 basis points to 9.22%, which analysts Chapel Hill tagged as a fall out of the CBN’s OMO net repayment of up to the tune of N50 billion.

CBN Effort to Sterilise Maturing Bills Will Drive Uptick in Treasury Rate
Godwin Emefiele, CBN Governor

Elsewhere, the bond market traded bearish, expanding by 4 basis points  to close the week at 13.04%, mostly due to the interest in short-duration bonds observed last week.

At the Nigerian Treasury bill auction which was held last week, the CBN offered N91.3 billion worth of bills, split across three maturities: 91-day (N4.7 billion), 182-day (N7.8 billion), and 364-day (N78.7 billion).

The subscription level reached N327 billion, translating to a bid to cover ratio of 3.6x, down from 4.7x previously. The CBN allotted N179 billion, with the auction stop rate closing relatively flat on average at 5.21%.

On Wednesday, analysts said the CBN will conduct a fresh Treasury bill auction with a total offer of N14.84 billion across three maturities: 91-Day: N2.52 billion, 182-Day: N1.7 billion, and 364-Day: N10.6 billion.

“We expect the stop rates to clear at close range to the last auction: 91-Day: 2.5%, 182-Day: 3.5%, and 364-Day: 9.65%)”, Chapel Hill Denham projected

However, analysts added that the size of the auction will be insignificant to move the market.

The Nigeria Debt Management Office (DMO) plans to roll over 100% of maturing bills. In terms of breakdown, the DMO intends to issue N722.17 billion in total, split across 91-day (N41.4 billion), 182-day (N151.1 billion), and 364-day (N529.7 billion) tenors.

“For us, we believe the CBN’s attempt to sterilize all maturing bills will probably drive a slight uptick in NTB yield in the short term”, analysts at Chapel Hill stated.

CBN Effort to Sterilise Maturing Bills Will Drive Uptick in Treasury Rate

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