Money Market: Afrinvest says T-Bills rates to trend lower

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Average yield on T-Bills drops to 3.9%
Afrinvest

Money Market: Afrinvest says T-Bills rates to trend lower

Due to increase liquidity expected in the market this week, Afrinvest has said it expects rates on Treasury Bills to trend lower.

The investment banking firm made the prediction on the back of N232.3 billion that is expected to hit the system from the Open Market Operation matured instrument.

“As such, we see Treasury bill rates trending lower in the week”, Afrinvest stated.

Meanwhile, analysts at the firm said they expect the CBN to continue its liquidity mop-up via OMO sales.

Last week, bearish sentiment persist in the money market as the Open Buy Back (OBB) and Overnight (OVN) rates opened the week at 2.4% and 3.3% respectively.

This was lower than previous week’s close of 3.0% and 3.8% due to improved system liquidity.

Despite Thursday’s OMO auctions, OBB and OVN rates closed lower at 2.0% and 2.5% respectively with the market still awash with liquidity at N1.7 trillion following an inflow of about ₦930 billion from maturing OMO instruments.

By the end of the last week, OBB and OVN rates both surged 13.2% and 11.2% week on week higher at 15.5% and 16.42% respectively as system liquidity settled at ₦1.1 trillion.

In line with its schedule, the CBN conducted Primary Market Auction (PMA) on Wednesday, offering instruments worth ₦104.1 billion, receiving total subscription of ₦261.5 billion and selling ₦104.1 billion across all tenors.

The sale was at stop rates of 3.00%, 4.00% and 5.70% for the 91, 182 and 364-day instruments respectively.

The 91-day offer was ₦20.4 billion; while subscription was ₦41.3 billion while actual sale was ₦20.4 billion.

Also, 182-day offer was valued at ₦31.8 billion; but subscription was valued at ₦44.2 billion; as CBN sale was settled at ₦31.8 billion.

More so, 364-day offer was ₦52.0 billion as against subscription of ₦175.1 billion; and sale was ₦52 billion.

These instruments were oversubscribed at 2.0x, 1.4x and 3.4x respectively.

Meanwhile, the CBN also conducted an OMO auction worth ₦500 billion on Thursday.

As a result of the relatively attractive yields at the auctions, there was strong investor interest in the 362-day instrument (Offer: ₦350.0bn; Subscription: ₦534.9bn; Sale: ₦476.4bn) which was oversubscribed at 1.5x.

Conversely, the 89-day (Offer: ₦20.0bn; Subscription: ₦8.9bn; Sale: ₦3.1bn) and 180-day (Offer: ₦30.0bn; Subscription: ₦1.4bn; Sale: ₦0.5bn) instruments were grossly under-subscribed at 0.4x and 0.1x respectively.

The OMO instruments were issued at marginal rates of 11.44% (89-day), 11.56% (180-day) and 13.00% (362-day).

In the secondary market, there was a mildly bearish performance as average yield rose 1bps week on week higher to 3.9%.

The 182-day instrument enjoyed the most buying interest as yields declined 3bps to 3.3% while the 91- day instrument closed flat at 2.9%.

Sell-offs were recorded in the 364-day instruments as yields advanced 4bps to 5.6%.

Analysts at Afrinvest said in the coming week, we expect OMO maturities worth ₦232.3bn to hit the system.

“As such, we see Treasury bill rates trending lower in the week ahead. Meanwhile, we expect the CBN to continue its liquidity mop-up via OMO sales”, Afrinvest held.

Money Market: Afrinvest says T-Bills rates to trend lower