T-Bill Rate Rises as Bond Auction Records Descent Subscription

T-Bill Rate Rises as Bond Auction Records Descent Subscription

Average yield on Treasury bill (T-bill) rises 9 basis points (bps) to 0.5% as investors sold instrument across market following a descent subscription in the bond auction. 

In the money market, funding pressures were broadly benign as financial system liquidity remained buoyant at N586.2 billion, albeit opening lower from N732.8 billion yesterday.

As a result, funding rates rose mildly but remained at low single digits.

The Open Buy Back (OBB) and Overnight (OVN) rates expanded by 12bps and 50bps to 0.50% and 1.00% respectively.

Chapel Hill Denham said another bond coupon payment worth N29.58 billion is expected tomorrow.

“We expect liquidity to remain buoyant in the near term, at least until the bond auction settlement on Friday”, the firm stated.

Investors remained cautious in the secondary market with bid-ask spread noticeably wide, as the Bond primary market auction was underway.

Notably, at the short end of the curve, the Nigerian T-bill benchmark curve expanded while the OMO curve was flat an average of 0.64%.

In the bond market, yields also expanded marginally by an average of 1bp across the benchmark curve to 6.95%.

At the bond PMA which held today, the Debt Management Office, DMO, offered N150 billion, split equally across three tenors (MAR 2027, MAR 2035, and JUL 2045).

Subscription was decent at N238.28bn, implying a bid-cover ratio of 1.9x (2.2x previously).

Chapel Hill Denham said due to investor demand for high yields, the DMO allotted only N122.36 billion at the open auction,

However, the DMO issued another N48 billion as non-competitive allotment, bringing the total sale to N170.36 billion.

Consequently, marginal rates expanded by across tenors, with the MAR 2027 clearing at 7.98%, MAR 2035 at 8.74% (+180bps) and JUL 2045 at 8.95% (+195bps).

“Following the greater clarity from the auction, we expect bid-ask spread to narrow tomorrow”, analysts at Chapel Hill Denham stated.

In the currency market, the Naira weakened marginally against the United States dollar at the I&E Window by 0.21% or 82 kobo at N394.17.

Read Also: Financial System Liquidity Keeps Money Market Rates Down

However, the local currency traded flat against the greenback in the parallel market, exchanging for N475.00.

External reserves sustained its uptrend, up 3.0% in January, to US$36.44 billion (on 18 January 2021), reflecting the impact of foreign currency loan in-flows.

T-Bill Rate Rises as Bond Auction Records Descent Subscription