Treasury Bill Swings on Heavily Liquid Financial System
The Nigerian Treasury Bill market ends the week on a bullish note with average yields on instruments contracted as financial system liquidity remains strong. Consequently, the overnight rate expanded by 12.75 percentage points week on week, according to Cordros Capital market report to 20.5%.
Analysts said the rate remained in the single-digit territory through most part of the week following a higher net liquidity position supported by Open Market Operations (OMO) maturities worth N19.20 billion.
The financial system liquidity maintained a weekly average of N219.50 billion compare with N80.69 billion last week.
However, analysts noted that the eventual expansion was driven by debits at the latter part of the week for cash reserve ratio and CBN’s weekly FX auction.
“We expect tighter liquidity in the system in the coming week, as funding for CBN’s weekly auctions is likely to outweigh expected inflows from OMO of N5.00 billion maturities”, Cordros said.
Treasury bill secondary market sees average yield across all instruments contracted by 64 basis points to 6.8% at the weekend.
Across the market segments, analysts said average yield at the OMO segment tumbled by 91 basis points to 7.7%, as lesser funding pressures influenced improved demand for bills.
Similarly, the average yield in the Nigerian Treasury bill segment tapered by 27 basis points to 5.6% at the weekend, yield had fallen to 5.5% on Thursday.
Cordros Analysts envisage the yield on T-bills will settle lower in the coming week, as investors improve buying activities in anticipation that issuances of instruments will reduce given the recent developments on foreign currency denominated borrowings.
“We expect quiet trading in the first few days at the Nigerian Treasury Bill market as participants position for the mid-week auction, with the CBN set to roll over N51.49 billion worth of maturities”, analysts said.
In the bond space, trading in the secondary market sustained its bullish run as the average yield contracted by 13 basis points to 11.9%.
“We note that there was improved demand in this space as investors continued to select attractive offers across the different segments of the curve”.
Across the benchmark curve, the average yield declined at the short (-11bps), mid (-18bps) and long (-5bps) ends following investors’ interest in the JAN-2022 (-28bps), NOV-2029 (-27bps) and MAR-2050 (-13bps) bonds, respectively.
In its projection for next week, Cordros Capital analysts said they still expect lower average yields as investors continue to cherry-pick relatively attractive instruments.
“In the longer term, we also maintain our view of tempered yields in the second half of the year, given our expectations of limited supply and deliberate efforts by the Debt Management Office to reduce borrowing costs for the government”, analysts added.
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Treasury Bill Swings on Heavily Liquid Financial System
