OMO, Treasury Bills Yields Drop as Investors Increase Bets
Average yields declined as investors increased bets on Nigerian OMO and Treasury bills in the secondary market amidst mixed expectations about higher rates offered by the Central Bank to players at OMO auctions.
Excess liquidity in the financial system has continued to fuel bargain hunting across the short, belly, and long end of the curve in the treasury bills market.
There was no supply from the Central Bank during the week, and the authority also failed to float OMO bills, leaving excess liquidity in the banking system intact toward the weekend.
A number of investment firms reported that limited interest emerged on the short and long end of the curve, including the 4-Dec, 25-Dec, and 3-Sep Nigerian Treasury bills.
Demand persisted for the 17-Mar and 7-Apr OMO bills, though wide bid-ask spreads kept trading volume low. The market anticipates investors to maintain a mixed to bullish tone, supported by ample market liquidity.
The average yield contracted by 6 bps to 18.7% in the secondary market on Thursday due to buying activities. Across the curve, the average yield contracted at the short (-1 bp) and long (-14 bps) ends.
The yield contraction was driven by the demand for 91-day-to-maturity (-1 bp) and 357-day-to-maturity (-32 bps) bills, respectively. Conversely, the average yield contracted by 46 bps to 25.0% in the OMO segment.
Fixed income market analysts expect rates to moderate slightly in September, supported by net repayments of N788.54 billion, which is expected to significantly boost system liquidity and strengthen auction demand.
Still, elevated government borrowing needs could limit the extent of this moderation, according to Meristem Securities Limited. The firm said the monetary policy committee stance will be major determining factor, any softening could reinforce downward pressure, while a hawkish tone may keep rates elevated. PZ Cussons Turnaround Narrative, Recovery Signal a Buy Recommendation
