Interbank rates to moderate as ₦181bn worth of TBills matures

Interbank rates to moderate as ₦181bn worth of TBills matures

Analysts have projected that interbank rates will as huge amount from maturing Treasury Bills is set to hit the financial system this week.

Treasury bills worth ₦181.36 billion will mature via open market operations (OMO); hence analysts said they expected interbank rates due to improve liquidity.

Last week, the open buyback (OBB) and overnight (OVN) rates opened lower at 5.3% and 6.1% respectively from previous week’s close of 6.3% and 7.2% even as system liquidity settled at ₦182.1bn.Interbank rates to moderate as ₦181bn worth of TBills matures

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However, Afrinvest said both the OBB and OVN rates declined to 4.3% and 5.3% respectively on Wednesday while system liquidity plunged to ₦177.8bn.

Market data showed that at the close of the week, the OBB and OVN rates printed at 17.6% and 19.8% respectively with system liquidity settling at about ₦220.7bn.

On Wednesday, Afrinvest the CBN at the primary market auction (PMA) issued 91-day (Offer: ₦19.8bn; Subscription: ₦30.61bn; Sale: ₦19.8bn), 182-day (Offer: ₦10.0bn; Subscription: ₦31.11bn; Sale: ₦10.0bn) and 364-day (Offer: ₦27.0bn; Subscription: ₦56.5bn; Sale: ₦27.0bn) instruments.

Specifically, the bills were issued at marginal rates of 1.20%, 1.39% and 3.19% from 1.20%, 1.50% and 3.40% in the previous week for the 91-day, 182-day and 364-day tenors respectively.

Analysts explained that demand remained strong at the auction as instruments across board were oversubscribed at 1.6x (91-day), 3.1x (182-day) and 2.1x (364-day).

On Thursday, Afrinvest noted that the CBN conducted OMO auction worth ₦50.0bn but issued a total of ₦45.4bn across three tenors.

The 103-day (Offer: ₦10.0bn; Subscription: ₦5.6bn; Sale: ₦5.6bn) and 173-day (Offer: ₦10.0bn; Subscription: ₦9.8bn; Sale: ₦9.8bn) bills were undersubscribed at 0.6x and 0.9x with stop rates of 4.92% and 7.74% respectively.

On the flip side, demand was strong for the 341-day (Offer: ₦30.0bn; Subscription: ₦79.1n; Sale: ₦30.0bn) instruments with a bid-to-cover ratio of 2.6x and a marginal rate of 8.94%.

In the secondary treasury bills market, performance was bullish as average yield across benchmark tenors trended lower by 18bps week on week to close at 1.8%.

The 180-day note enjoyed the most demand, resulting in average yield decline to 1.2% from 2.0% in the previous week.

However, the 91 and 364-day bills closed the week flat.

“In the coming week, we expect high liquidity from maturing OMO bills and T-bills to drive rates lower in the secondary market”, Afrinvest stated.

Cowry Asset Management said in the new week, treasury bills worth N181.36 billion will mature via OMO.

“Hence, we expect interbank rates to moderate given the relatively huge amount of maturing T-bills”, the firm noted.

In it note, Cowry Asset explained that Nigerian Inter-bank Offered Rate (NIBOR) for 3 months and 6 months fell to 4.29% (from 4.44%) and 4.44% (from 4.69%) respectively.

However, overnight funds and 1 month rose to 19.33% (from 8.0%) and 4.91% (from 4.49%) respectively.

Interbank rates to moderate as ₦181bn worth of TBills matures

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