Spot Rate on 364-Day T-Bills Slides Again on Heavier Subscription
Robust subscription level witnessed at the Central Bank of Nigeria Treasury bills primary market auction drags 364-day bill stop rate lower as inflation worries is expected to continue declining month on month till year-end.
Analysts’ consensus indicates headline inflation would see a moderation in the third and fourth quarter of 2021 before the base effect would begin to moderate.
Data shows that demand seen in longer tenor bills in the past auction, epically in the second half of 2021 has continued to drag spot rate while short-dated bill sees their respective rates unchanged at 2.50% and 3.5%.
At the Central Bank primary market auction conducted last week, the stop rate for 364-day bills falls to 6.8% amidst relatively strong financial system liquidity.
At the auction, the monetary authority offered T-bills worth N157.21 billion which was oversubscribed by two times with a total bid of N394.12 billion worth. Eventually, a total sum of N307.34 billion worth of the bills was allotted to investors.
Strong demand recorded on 364-day bills resulted in another 55 basis points reduction in stop rate, fell sharply to 6.80% from 7.35%.
Cowry Asset Management said in a market report that the CBN appears to have been encouraged by a relatively high economic growth of 5.01% year on year recorded in the second quarter of 2021 as it kept the interest rate low.
Elsewhere, Nigerian Interbank Treasury True Yield Fixing (NITTY) for 3 months and 12 months further moderated to 3.28% (from 3.36%) and 7.07% (from 7.52%) respectively. However, 1 month and 6 months rose to 2.53% (from 2.49%) and 4.49% (from 4.46%) respectively.
Meanwhile, given the relatively low value of matured open market operations (OMO) bills worth N60.00 billion, NIBOR for Overnight funding dropped to 11.40% (from 22.50%).
On the flip side, Nigerian Interbank Offered Rate (NIBOR) rose for 1 month, 3 months and 6 months to 11.53% (from 9.13%), 10.48% (from 12.40%), and 13.25% (from 11.05%) respectively.
“In the new week, treasury bills worth N293.87 billion will mature via OMO; hence, we expect interbank rates to move lower amid financial liquidity ease”, Cowry Asset said.
In the just concluded week, sentiment remained bullish at the fixed income space as investors continue to offer the bonds at lower yields amid demand pressure; although analysts said they noticed a bit of funding pressure immediately after T-bills auctions.
Specifically, the 5-year 13.53% FGN APR 2025, the 10-year 16.29% FGN MAR 2027 bond, 10-year 13.98% FGN MAR 2028 bond and 20-year 16.25% FGN MAR 2037 paper gained N1.41, N1.44, N0.72 and N1.57 respectively.
Also, their corresponding yields fell to 10.26% (from 10.72%), 11.13% (from 11.45%), 11.40% (from 11.55%) and 12.47% (from 12.67%) respectively.
Meanwhile, analysts said the value of FGN Eurobonds traded at the international capital market rose for all maturities tracked.
It was noted that the 10-year, 6.375% JUL 12, 2023, the 20-year, 7.69% FEB 23, 2038 paper and the 30-year, 7.62% NOV 28, 2047 debt gained US$0.26, US$1.48 and US$1.44 respectively.
Also, their corresponding yields rose to 2.93% (3.09%), 7.59% (from 7.75%) and 7.71% (from 7.84%) respectively.
“In the new week, we expect yields to further moderate as local over-the-counter bond prices increase even as funding pressure amongst participants eases”, analysts said.
Read Also: Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%
Spot Rate on 364-Day T-Bills Slides Again on Heavier Subscription
