T-Bills Buying Intensified Ahead of CBN Auction

T-Bills Buying Intensified Ahead of CBN Auction

Supported by a buoyant liquidity level, the Nigerian Treasury bill (NTB) buying intensified in the secondary market ahead of the Central Bank of Nigeria (CBN) primary market auction sales.

The CBN is scheduled to roll over N182.85 billion worth of maturing bills on Wednesday. In their separate reports, a slew of market analysts expects liquidity level to tumble within the week.

Cowry Asset Management said in its market report that the Nigerian Inter-Bank Offered Rate fell across all tenor buckets as liquidity increased and banks with surplus funds demanded lower rates.

Short-term benchmark rates moved in a mixed direction. The open repo rate was stable at 11.50%, while the overnight lending rate moderated by 37 basis points to 11.88%.

On weekly comparison, robust liquidity dragged rates downward. The overnight rate contracted by 138 basis points on the back of the buoyant system liquidity from the prior week.

The liquidity level in the market was supported by additional inflows from OMO maturities worth N20.00 billion and FGN bond coupon payments worth N5.63 billion.

In its market note, Cordros Capital Limited highlight that the average system liquidity settled at a lower net long position of N184.17 billion, relative to the net long position of N339.93 billion in the previous week.

In the absence of any significant inflows into the system, analysts said they expect system liquidity to be pressured next week, causing the overnight lending rate to trend upward from the current level.

In the secondary market, Nigerian Treasury bills rallied again as the healthy system liquidity continued to support buying interest for bills across the market.

Consequently, the average yield contracted by 44 basis points to 6.4%, according to fixed income analysts report reviewed by MarketForces Africa. >> Nigerian Treasury Bills Yield Rises to 7%

Analysts at Cordros Capital said they noticed particular interest for the 97-day to maturity (109bps), 251-day to maturity (-144bps), and 300-day to maturity (-100bps) bills, respectively.

Buying interest in 97-day-to-maturity bills dragged yield lower by 109 basis points. Investors’ interest in 251 days to maturity dragged the yield curve by 144 basis points. Then, the 200-day to-maturity yield declined by 1%.

“We believe yields in the NTB secondary market will tilt northwards, following our expectations for depressed system liquidity.

“Notwithstanding, we expect market participants to shift focus to the NTB PMA on Wednesday where the CBN is scheduled to roll over N182.85 billion worth of bills”, analysts at Cordros Capital projected. #T-Bills Buying Intensified Ahead of CBN Auction

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