Treasury Bill Rate Inched Up to 9.5% amidst Weak System Liquidity

Treasury Bill Rate Inched Up to 9.5% amidst Weak System Liquidity

Spot rates on 364-day Treasury Bills inched up 50 basis points (bps) to 9.5% Wednesday at the Central Bank of Nigeria (CBN) primary market auction amidst yields repricing in the fixed income market.

Sustaining the previous trend, the financial system liquidity remained constrained, opened net short of N248.7 billion, albeit an improvement from a deficit of N313.6 billion yesterday.

Notwithstanding, interbank funding rates increased as the Open Buy Back and Overnight rates closed higher by 75 bps and 50 bps to 15.00% and 15.25% respectively.

“We expect funding pressures to ramp up towards the end of the week, due to the scheduled bi-weekly retail FX auction holding on Friday”, Chapel Hill Denham said in its market report. 

At Mid-week, the fixed income market traded largely flattish as primary market activity was underway. At the front end of the curve, the T-Bills benchmark curve closed flat at an average of 4.23%.

Following a similar trajectory, the open market operations (OMO) curve expanded by 11bps to 7.27%.

In the bond market, yields increased mildly by an average of 1bp across the benchmark curve to 12.68%, due to marginal upward repricing of yields at the long end of the curve (+2bps to 13.71%).

At the rollover Treasury Bills auction Wednesday, the Debt Management Office (DMO), via the CBN, offered N88.5 billion, split across three tenors: 91-day (N11.4 billion), 182-day (N6.0 billion), and 364-day (N71.1 billion) bills. 

Chapel Hill Denham said despite the weak liquidity in the financial system, the subscription level was decent N242.9 billion, implying a bid-cover ratio of 2.7x, down from 3.6x at the previous auction.

However, the CBN over-allotted, selling N129.5 billion: N7.2 billion of 91-day, N6.0 billion of 182-day, and N116.3 billion of 364-day.

The stop rate on the 364-day cleared higher by 50bps to 9.5%, while the 91-day and 182-day were unchanged at 2.0% and 3.5% respectively.

In a related development, the Nigerian local currency, naira, continued to trade within a tight band at all segments of the foreign exchange (FX) market.

 In the Investors and Exporters Window, the Naira strengthened against the United States dollar by 0.1% or 42 kobo to close at N411.25.

However, the exchange rate remained unchanged in the official and Secondary Market Intervention Sale (SMIS) segments at N379.00 and N380.69 respectively while the pair traded flat at N485.00 in the parallel market.

Read Also: Stop Rate on 364-Day T-Bills Projected to Rise as CBN Holds

Treasury Bill Rate Inched Up to 9.5% amidst Weak System Liquidity