T-Bills Yield Steadies at 4% ahead of Auction Sales
The average yield on Nigerian Treasury bills (NTB) was unchanged at 4.02% amidst robust liquidity in the financial system, according to market data. In the secondary market, the absence of financial pressures halted the yield curve to rise as investors maintained positions.
The position reversed following large debits booked on the financial system by monetary policy authority. On Wednesday, the Central Bank of Nigeria (CBN) will conduct its weekly primary market auction. There is an expectation that spot rates movement will be influenced by liquidity level in the financial system.
At the auction, the CBN is expected to roll over N224.50 billion worth of bills to market participants, according to its treasury bills sales calendar. Up till Friday’s close, liquidity level in the financial market was strong enough to accommodate demand for cash amidst rising exposure to a high inflation rate.
However, funding pressures resume after cash reserve ratio debits on banks and outflow for FX auctions that were conducted.
In the money market, benchmark short-term rates spiked as liquidity position eased. Notably, the open repo rate (OPR) and the overnight lending rate (OVN), climbed to 12.13% (from 10.50%) and 12.43% (from 10.81%), respectively.
On weekly comparison, the overnight (OVN) rate expanded by 161 basis points. Cordros Capital said the rate was flat for most of this week amid N50 billion inflow from OMO bills maturities.
However, the short-term benchmark rate expanded at the week’s twilight following late debits for cash reserve ratio (CRR) and foreign exchange (FX) auctions by the Central Bank of Nigeria.
Consequently, the average yield closed at a net long position of N908.57 billion versus a net long position of N209.69 billion in the previous week, according to Cordros Capital.
In the secondary market, trading activities on T-bills ended with mixed sentiments, albeit with a bearish undertone, as the average yield across instruments increased slightly by 2 basis points to 4.02%.
“We highlight that the excess liquidity in the system this week triggered sell-offs in the NTB segment in the market which drove the overall yield expansion”.
Traders said across the segments, the average yield increased by 4.02% in the NTB secondary markets but contracted by 75 basis points to 3.0% in the OMO segment.
For most of the trading days in February, the Nigerian Treasury bills market was influenced by elevated liquidity, with average yield coasting around 1.3% levels, Cardinalstone analysts said in its February update.
Analysts said the dynamics changed following the sudden jump in stop rates at the last primary market auction in February, wherein the 1-year Nigerian T-Bill rate surged to 9.9% from 2.2%. Consequently, average NTB yields in the secondary market increased by 2.5 points. # T-Bills Yield Steadies at 4% ahead of Auction Sales
