T-Bills Close Flattish as Naira Faces Pressure at Official FX Window
Godwin Emefiele, CBN Governor

T-Bills Close Flattish as Naira Faces Pressure at Official FX Window

The average yield on Nigerian treasury bills closed flattish as naira sees pressure at the official window, the Investors and Exporters foreign exchange window to N413.68 to a dollar, a 0.2 per cent decline from Friday’s close.

The ongoing speculative demand and widening foreign exchange spreads keep parallel market rates above the rooftop as naira traded at N572 despite the apex bank official de-recognition of the segment.

Some analysts believe FX rates at the parallel market show the true value of the local currency as it is based on demand and supply, but the Central Bank has remained unfazed with the heavy unofficial devaluation amidst the dollar shortage.

In the money market, liquidity pressure eased on interbank rates which saw a strong contraction. Data from the FMDQ platform shows that open buy back slides 200 basis points to 14.50 per cent.

Similarly, the overnight lending rate contracted by 250 basis points to 15.3%, a situation analysts at Cordros Capital attribute to the absence of significant funding pressures on the system.

In the fixed income market, trading activities remains quiet, staying below the pre-pandemic level amidst scarce catalysts for upward yield repricing.

On Monday, the Nigerian Treasury bills secondary market closed flat, as the average yield was unchanged at 5.6%.  Similarly, analysts said the average yield at the open market operations (OMO) segment returned flattish at 6.3%.

In the bond space, trading activities in the secondary market ended on a bullish note, as the average yield contracted by 4 basis points to 11.2%.

Across the benchmark curve, analysts said the average yield contracted at the short (-1bp) and long (-8bp) ends following demand for the APR-2023 (-2bps) and MAR-2035 (-25bps) bonds; the mid-segment was flat.

Last week, opening market liquidity was reported at N312.8 billion on Friday, according to Coronation Merchant Bank fixed income report as overnight and repo rates closed within a range of 16.5-20.0%.

The secondary market for Nigerian Treasury bills was largely bearish due to the increased supply of the instruments and OMO bills from the auctions in the past weeks.

As a result, the average Nigerian Treasury Bill yield rose by 66 basis points week on week to close at 5.6%. The average yield for OMO bills also rose by 12 basis points week on week to close at 6.3%.

Recall the CBN allotted N155.9 billion worth of Nigerian Treasury bills to market participants at the primary market auction as it maintained the stop rates across all three tenors (91-day: 2.5%, 182-day: 3.5%, and 364-day: 7.2%).

At the OMO auction, the CBN allotted N20 billion worth of OMO bills across all three tenors and the stop rates remained unchanged from the previous auction (91-day: 7%, 187-day: 8.5%, 334-day: 10.1%).

Read Also: FX Scarcity Will Drag Economic Recovery as Nigeria Faces

The secondary market for FGN bonds was bearish in response to sell-offs during the week. This led to the average yield increasing by 22 basis points to close at 11.3%. Meanwhile, at the Eurobond market, the average yield of the sovereigns under our coverage increased 4 basis points to 5.8% week on week.

T-Bills Close Flattish as Naira Faces Pressure at Official FX Window