T-Bills Yield Spikes ahead of CBN Auction

T-Bills Yield Spikes ahead of CBN Auction

The average yield on Nigerian Treasury bills (NTB) rises further over sell pressures seen in the secondary market last week amidst rising headline inflation rate.

Analysts however project that market participants will shift focus this week as the Central Bank of Nigeria will conduct a primary market auction on Wednesday.

According to the auction calendar, the CBN is expected to roll over N240.26 billion worth of maturities. With the ongoing repricing, the market expects spot rates to rise further amidst a plan to securitise N20 trillion overdraft by FG from CBN via fresh issuance,

There were sustained pressures in the financial system last week, a tight level saw that kept short-term rates higher at the money market.

Last week, the overnight lending rate was flat at 16.5% while the OPR rate rose 17 basis points to 16.3% System liquidity moderated by 2.6% to ₦332.7 billion this week following liquidity squeeze from the bond auction conducted on Monday.

Market analysts at Cordros Capital said in their reports that the liquidity level for the week settled lower at a net short position of N174.62 billion as against a net long position of N54.08 billion in the previous week.

It was noted that the system was debited N107.88 billion for FGN Bond reopening sold on Monday by DMO and FX auctions. The combined outflow reported outweighed the N46.44 billion inflow from FGN bond coupon payments.

“We expect the OVN rate to moderate from current levels next week. We believe the expected inflows from FGN bond coupon payments (N178.50 billion) and OMO maturities (N30.00 billion) would saturate and improve system liquidity”, Cordros Capital analysts said in the market note. READ:Yield on T-Bills Spikes, Bond Slides Small as Naira Falls

Last week, the sustained illiquidity in the system drove another bearish sentiment in the Treasury bills’ secondary market, according to analysts. Local banks sold off positions to meet their financial obligations.

Consequently, the average yield across all instruments expanded by 235 basis points to 10.3%.

Across the segments, analysts stated that the average yield increased by 298 basis points to 10.3% at the Nigerian Treasury Bills segment, but moderated by 2 basis points to 10.3% at the OMO secondary markets.

A slew of analysts said they expect yields in the T-bills secondary market to trend southwards, given the anticipated inflows in the system. In the new week, the liquidity level is anticipated to improve mildly given the expected inflow worth ₦240.3 billion.

As such, the secondary market is projected to close the week on a mildly positive note.

# T-Bills Yield Spikes ahead of CBN Auction#

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