Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%

Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%

Funding pressure persist in the money market as interbank pricing rates jerked up as spot rate on 364-day Nigerian Treasury Bills jumps 100 basis points (bps) to 9% at the auction conducted Wednesday.

At the Nigerian Treasury Bill auction held yesterday, the debt management office (DMO), through the Central Bank, offered a total of N69.56 billion across three maturities.

However, demand was robust, with a total subscription of N153.38 billion, implying a bid-cover multiple of 3.6x compare with 2.2x at the last auction. In the money market segment, funding pressure however persisted following tightened financial system liquidity.

Liquidity in the financial system opened in the deficit of N219.9 billion from a surplus of N41.1 billion Wednesday, so the open buyback and overnight rates expanded by 250bps and 275bps to 14.50% and 15.00% respectively.

Chapel Hill Denham said funding pressure is expected to remain in the trading session ahead, due to provisioning by banks for the retail foreign exchange auction.

Generally, sentiments remained largely bearish in the fixed income market. In the bills segment, discount rates on benchmark T-Bills closed marginally lower by an average of 1bp to 3.79%.

Meanwhile the open market operations (OMO) curve expanded by 14bps to 6.50%. In the bond market, yields expanded across the benchmark curve by an average of 23bps to 11.98%.

The DMO took advantage of the strong subscription to frontload issuances, allotted N153.38 billion – N12. 5illiobn of 91-day, N8.8 billion of 182-day, and N132.1 billion of 364-day bills.

Auction results show the stop rate on the 91-day and 182-day tenors were unchanged at 2.0% and 3.5% respectively, while the 364-day rate expanded by 100bps to 9.0%.

Earlier today, the NBS published the Consumer Price Index (CPI) report for March 2021, which showed the headline inflation rate surged by 84bps to 18.17% year on year, the highest level in more than four years.

In a related development, the Nigerian local currency, Naira, continued to trade within a tight band at all segments of the foreign exchange (FX) market on Thursday.

In the Investors and Exporters Window, the Naira traded flat against the United States dollar to close at 410.50. However, the exchange rate remained unchanged in the official and Secondary Market Intervention Sale (SMIS) segments at 379.00 and 380.69 respectively.

Read Also: Inflation Rate Jumps to 18.17% after 19-Month Consecutive Rise

In the parallel market, the Naira traded flat against the dollar at 482.00 while external reserves sustained a recent upward trend, climbing to a 6-week high of US$35.17 billion.

Nigerian Stock Market Reverses Gains

Today, Nigeria’s equity benchmark gave up all of the gains recorded from the previous session, moderating by 17bps, following losses witnessed across major counters.

Thus, year to date loss rose to 4.22%, while the market capitalisation dropped to N20.186 trillion.

On today’s price list, GUINNESS (+10.00% to N29.15) once again topped the gainers’ chart, followed closely by FTNCOCOA (+9.30% to N0.47%) and MORISON (+9.30% to N0.94). Meanwhile, UAC-PROP (-10.00% to N0.72), PZ (-9.78% to N4.15), and STUDPRESS (-9.50% to N1.62) were today’s top losers.

Performance across Chapel Hill Denham’s coverage universe was broadly mixed but with a bearish bias. The firm said 3 of 5 of its coverage indices closed in the red terrain.

The NSE Banking, NSE insurance, and NSE industrial goods indices declined by 97bp, 275bp, and 18bps, respectively. These masked the gains across the NSE oil & gas and NSE consumer goods indices, both of which rose by 9bps and 12bps, respectively

The market’s activity was similarly mixed, with the total volume rising by 14.89% to 319 million, while the total value traded declined by 21.85% to N1.776 billion.

Today’s most traded stocks by volume were FIDELITYBK (46.71 million units), ACCESS (36.89 million units), and MBENEFIT (27.70 million units). On the other hand, the top traded stocks by value were GUARANTY (N0.352 billion), ACCESS (N0.298 billion), and FBNH (N0.176 billion).

Elsewhere, Chapel Hill Denham’s Paramount Equity Fund (PEF) and Women Investment Fund (WIF) closed flat.

Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%