Investors to Participate Strongly in CBN Auction, Analysts Say
Analysts said they are expecting full participation as the Central Bank of Nigeria (CBN) is scheduled to hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) today.
Existing T-Bills worth ₦124.88 billion will mature and are expected to be reissued in ₦8.85 billion, ₦3.50 billion and ₦92.54 billion across the 91-day, 182- day, and 364-day tenored instruments.
Meristem Securities recalled that at the last primary market auction (PMA), investor interest remained strong.
Total offer of ₦113.97 billion was met with total subscription of ₦348.27 billion and bid-to-cover ratio of 3.05x.
Much in line with previous Treasury bill auctions, stop rates trended lower, howbeit marginally on the short and medium-term bills, and by -25bps on the 1-year bill.
Stop rates declined to 1.08%, 1.49%, and 2.80% from 1.09%, 1.50% and 3.05% at the preceding auction for the 91-day, 182-day and 364-day instruments respectively.
Bullish sentiment has held sway in the secondary Treasury bills market, analysts stated.
Meristem attributes the development to a situation which the firm expects would linger as market dynamics support sustained buying pressure.
Speaking to the market dynamics, analysts explained that there have been a dearth of attractive alternatives investments amidst system liquidity.
Since the last primary market auction (PMA), Meristem said average T-bills yield have dipped by 8bps to 1.37% from 1.45%.
This indicates a sustained bullish momentum, supported by robust liquidity in the financial system.
Analysts had highlighted expectation for headline inflation to rise to 13.49% in September from 13.22% in August 2020.
“We identified food supply shortfalls, higher energy costs and the pass-through to transportation and logistics costs as upside risks.
“This would in turn further worsen the real rate of return which is sunk deep in the negative territory”, Meristem stated.
However, analysts said they do not expect investors’ participation to be deterred by this development considering system liquidity levels.
As scheduled, financial system liquidity is expected to be supported by this week’s incoming Open Market Operations maturities worth ₦370 billion.
“We also do not rule out investors opting to rotate their funds into the equities market, which has benefitted in the past two weeks from the abysmal fixed income yield environment.
“We also consider that foreign investors willing to repatriate their funds might now be able to do so, thus, possibly limiting their participation in the upcoming primary market auction”, Meristem explained.
FX repatriation could be possible following the resumption of FX sales by the CBN to both BDCs and in the I&E FX window, says analysts.
Read more: Interbank rates to moderate as ₦181bn worth of TBills matures
