T-Bill Ends Week at 6.14% as Funds Move to Bond Space
Average yields on the Nigerian Treasury Bill printed flattish Friday at 6.14% as fixed income investors shifted preference to bond space. Treasury bill space has remained quiet following two consecutive month on month drop in the headline inflation rate.
In the money market, funding rates inched higher despite the fact that pressure eased on liquidity. The open buyback and overnight rates inched higher by 50 basis points to close the week at 18.75% and 19.25% respectively.
According to Chapel Hill Denham, this was mostly driven by the reduction in repurchase agreement (Repo) volumes in the market. Analysts hinted that the financial system liquidity closed at a surplus of N25.1 billion today compared to a deficit of N62.3 billion yesterday.
Like yesterday, activities in the front end of the yield curve were mostly quiet. This resulted in the Nigerian Treasury Bill and open market operations (OMO) benchmark curve closing flat at 6.14% and 9.24% respectively.
“This was on the back of investors shifting their preference to bonds. In the bond space, we saw higher trading activities since the beginning of the week, resulting in the benchmark curve compressing by 15 basis points to 12.78%”, Chapel Hill Denham said.
Analysts explained that investors mostly took long positions in the mid-end of the yield curve. The outcome of investors’ focus on the long end of the curve resulted in a slight flattening of the yield curve.
At the OMO auction conducted yesterday, the Central bank (CBN) sold N17.3 billion worth of OMO bills across three maturities (89-day: N3.0 billion; 159-day: N4.3 billion; 348-day: N10 billion).
The bid-to-cover ratio was 3.7X. The pattern of subscription was similar to the T-Bill auction held on Wednesday as investors mainly oversubscribed the 348-day bills.
It was however noted that the auction’s stop rates cleared at previous level (89-day: 7.0%, 159-day: 8.5%, 348-day: 10.1%).
In a related development, Naira appreciated by 12 basis points or 50 kobo in the Investors and Exporters market and depreciated by 100 basis points or 5 Naira in the parallel market as the market moved past the CBN’s announcement of increasing supply for PTA and BTA.
T-Bill Ends Week at 6.14% as Funds Move to Bond Space
