Treasury Bills, Bond Yields Rise, OMO Rates Steady
The Nigerian Treasury bills, and Federal Government (FGN) bond yields recorded upticks while spot rates on Central Bank of Nigeria (CBN) open market operation (OMO) bills were steady at the auction conducted last week.
In the money market, short term rates decline due to healthy liquidity in the financial system. As such, the robust liquidity position dragged interbank rates lower as of Friday – both open buy back and overnight lending rates slowdown.
Specifically, interbank rates trended lower on four of the five trading days, Afrinvest said in a market report. Analysts explained that at the start of the week, open buy back and overnight rates closed at 12.8% and 13.7% respectively as system liquidity rose to ₦215.6 billion
As of Friday, the overnight rate dipped 700 basis points week on week to close at a single digit of 7.0%, according to market data cited by Cordros Capital as the liquidity position in the financial system strengthened.
Tracking the flows, investment firms’ analysts’ notes indicate that the average liquidity level for the week settled at N312.07 billion as against N12.96 billion in the previous week.
The increase was attributed to inflows from FAAC disbursement worth N400.00 billion and N62.69 billion from OMO maturities that outweighed debits for CRR, N40 billion OMO and FX auctions.
Cordros Capital said in the market report that analysts expect the overnight lending rate to trend upward this week, as funding pressures from the CBN’s auction will likely offset the expected inflow from OMO maturities worth N20.00 billion.
In the Treasury bills space, bearish sentiments dominated the secondary market despite the buoyant liquidity in the system, Cordros Capital analysts said. READ: T-Bills Investors See Steady Yield After Quiet Trading Activities
Analysts attribute the performance to market participants selling off their positions amid scarce bids for the available offers. Thus, the average yield across all instruments expanded by 10 basis points to 4.1%.
Across the segments, traders stated that the average yield expanded by 13 basis points to 4.0% in the Nigerian Treasury bills segment but was flat at 4.4% in the OMO segment.
Last week at the OMO auction, the CBN offered and allotted N40.00 billion worth of bills to market participants and maintained stop rates across the three tenors, as with previous auctions.
Following the relatively lower inflows expected in the system next week, analysts said they are expecting low demand for T-bills and a slight expansion in yields from current levels.
This week, the market focus will be shifted to the Nigerian Treasury Bills primary market auction holding on Wednesday where the CBN is expected to roll over N167.22 billion worth of instruments.
Trading activities in the Federal Government of Nigerian (FGN) Bond market ended on a mixed note. Last week, Bond investors cherry-picked attractive instruments across the curve.
Trading data shows that the average yield across all instruments pared by 6 basis points to close at 11.2%. Across the benchmark curve, analysts said the average yield contracted at the short (-11bps), mid (-7bps), and long (-3bps) ends as investors demanded the JAN-2026 (-60bps), FEB-2028 (-22bps), and MAR-2036 (-9bps) bonds, respectively.
In its market report, Cordros Capital maintains analysts expect an uptick in bond yields in the medium term, as both the FGN’s borrowing plan for 2022 and expected fiscal deficit point toward an elevated supply. # Treasury Bills, Bond Yields Rise, OMO Rates Steady