Nigerian Banks Raise T-Bills Holdings, Yield Tumbles
The average yield on Nigerian Treasury Bills tumbles in reaction to local deposit money banks’ decision to raise their respective holdings with pockets of buying interest seen across tenors. Bills buying was driven by relatively strong liquidity levels in the financial system due to inflows from maturing instruments.
The Central Bank of Nigeria is expected to conduct a primary market auction on Wednesday to roll over N193 billion maturing bills from the economy. Market analysts are projecting that spot rates are likely to be re-priced as investors face with weak naira assets.
In the money market, short-term rates had eased to single digits as the financial system received inflows from maturing instruments last week. Market data from FMDQ Exchange showed that the Open repo and overnight lending rates printed at 14.5% and 15.2% respectively in the previous week.
However, by midweek, the financial system liquidity peaked at ₦589.1 billion which led to a downtrend in rates to 8.7% and 9.0%, according to Afrinvest analysts’ note.
Market analysts said by the end of the week, open repo and overnight lending rates closed at 8.5% and 8.8% respectively while the liquidity level rose 34.2% above the previous week’s record to settle at ₦479.4 billion.
The liquidity level is projected to improve in the new week due to ₦193 billion inflows from Nigerian Treasury bills and ₦105 billion from OMO bills maturities.
Overall, robust system liquidity however impacted yield direction in the secondary market for trading Nigerian Treasury bills. According to Cordros Capital, sentiments turned bullish following the healthy system liquidity as local banks sought to sterilize their idle cash by demanding T-bills.
As a result, market analysts and traders said the average yield across all instruments contracted by 6bps to 10.0%. Across the market segments, the average yield contracted both at the NTB and OMO secondary market by 7 basis points to 11.9% and 2 basis points to 10.2%, respectively.
“We expect yields in the T-bills secondary market to trend northwards, given the anticipated squeeze in the system. Notwithstanding, we believe participants will shift focus to next week’s NTB PMA, as the CBN is set to roll over NGN193.03 billion worth of maturities”, Cordros Capital projected.
Across tenor, analysts’ notes indicated that the 91-day instrument attracted buy interest as yield dipped 264 basis points to 8.5%, according to Afrinvest. READ: Treasury Bill Yield Rises as Naira Tumbles
However, this was overshadowed by sell pressure on the 182 -day and 364-day bills as yields rose 259 basis points and 63 basis points on weekly comparison to 11.0% and 15.3% respectively. CBN is expected to roll over N193 billion maturing bills via primary market auction.