T-Bills Rate Closed Flat as DMO Plans ₦150bn Bond Auction
Patience Oniha - DG, Debt Management Office

T-Bills Rate Closed Flat as DMO Plans ₦150bn Bond Auction

Average yield on Nigerian Treasury bill closed flat at 0.39% as the Debt Management Office (DMO) plans to offer ₦150 billion bond Primary Markey Auction (PMA) for subscription on Wednesday.

The T-bills market traded flattish, following heavy selloffs at the long end of the market, which offset pockets of bargain-hunting elsewhere, Greenwich Merchant Bank said in a market report.

In the money market, funding pressures eased further as financial system liquidity improved.

The improved liquidity was supported by N201. 9 billion inflow from Open Market Operations (OMO) maturities and bond payment on Monday.

As a result, the Open Buy Back (OBB) and Overnight (OVN) rates eased by 12 basis points (bps) and 33bps to 0.38% and 0.50% respectively.

“We expect liquidity to remain buoyant this week, at least until the bond settlement on Friday”, Chapel Hill Denham stated.

Analysts said an additional bond coupon payment is expected this week.

Meanwhile, sentiments were broadly bullish in the fixed income market as a result of the buoyant liquidity in the financial system, even as investors remained cautious ahead of the bond auction. 

At the front end of the curve, the Nigerian Treasury bill benchmark curve closed flat at an average of 0.39%, while the OMO curve eased by 9bps to 0.64%.

In the bond market, the benchmark bond yield curve compressed by an average of 10bps to 6.94%, mainly due to renewed interest in long duration (-47bps to 7.80%).

At the bond auction, the DMO is expected to offer a total of ₦150 billion, split equally (₦50bn) amongst three tenors (MAR 2027, MAR 2035, and JUL 2045).

Chapel Hill Denham said while liquidity should remain buoyant this week, it expects risk-averse investors to wait on the side-lines given the uncertainty in the market.

The firm believes that the DMO will likely mount a resistance against investors demanding for higher yields, but unlikely to be successful, given the sizeable deficit financing needs in the 2021 budget (₦4.7tn).

As a result, analysts said they expect marginal rates to close substantially higher (+100bps at the minimum).

In the currency market, the Naira appreciated against the United States dollar at the I&E Window by 0.12% or 48 kobo at ₦393.35.

However, the local currency traded flat against the greenback in the parallel market, exchanging for ₦475.00.

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 inflows.

Read Also: Bond Auction: Budget Deficit Funding Size to Push Rates Higher –Analysts

T-Bills Rate Closed Flat as DMO Plans ₦150bn Bond Auction