Treasury Bills Spot Rates to Remain Steady as CBN Rollover N112bn
Analysts see steady treasury bills spot rates this week as the Central Bank of Nigeria (CBN) sets to roll over about N112 billion at the primary market auction schedule for the mid-week. Last week, the Nigerian Treasury bill market closed on a bearish note as yields witnessed a moderate adjustment amidst the Eurobond raise.
Investors were a bit cautious trying to rebalancing portfolios following various market developments as the equities segment closed positive. United Capital in a note observed that the financial system liquidity was tight despite interbank rates slowdown, though in double-digit terrain.
Data from the FMDQ platform showed that Open Buy Back (OBB) and Overnight (OVN) rates tumbled 50 basis points each to close at 16.00% and 17.25% respectively. This, according to analysts, relates directly to the impacts of debits for bond auction settlement conducted by the Debt Management Office (DMO).
In the NTB secondary market, analysts also noted that performance was slightly bearish as average yield rose marginally by 4 basis points week on week to close at 5.61% from 5.57% at the close of last week.
Then, United Capital analysts said they saw marginal bearish sentiments in the secondary open market operations (OMO) market as the average yield closed higher at 6.43%, 9 basis points week on the week above the previous week’s close.
“Looking ahead, we expect to see system liquidity ease and inter-bank rates trend lower from the net inflows from FAAC and N105.0 billion worth of OMO maturities”.
This week, the Central Bank of Nigeria (CBN) is expected to conduct a Treasury bills auction rolling over a total of N111.9 billion worth of bills on Wednesday. At the auction this week, analysts said they do not expect the apex bank to hike stop rates as it did in the previous auction.
Recall that Debt Management Office (DMO) conducted a bond auction selling a total of N277.1 billion worth of bonds as against N150.0 billion on offer. Investors’ appetite across the offerings was strong as the 2028s, 2036s and 2050s recorded subscription rates of 1.0x, 2.5x and 3.1x respectively.
Overall, the auction was subscribed by 2.2x receiving a total bid of N334.3 billion. The marginal rates on 2028s and 2036s remained unchanged from the previous auction at 11.60% and 12.75%, respectively.
Interestingly, the marginal rate in the 2050s rose by 20bps to 13.00%, according to the DMO Bond auction result obtained by MarketForces Africa.
In the secondary bonds market, performance was reflective of the outcome in the auction (where marginal rate on the 2050s reversed to 13.00%) as United Capital analysts saw sell pressures on the long end of the bonds market while we saw buying interest at the end of the short and mid-term of the curve.
Overall, this reversed the sustained bearish sentiment from the previous week as the average yield on sovereign bonds declined by 8 basis points week on week to 11.23% from 11.31%, across the curve.
In the same vein, the corporate segment closed on a bullish sentiment as the average yield fell by 16 basis points week on week to 11.72% from 11.88%.
In the Eurobond market, the DMO confirmed the successful issuance of fresh Eurobonds with the offering attracting bids worth $12.2 billion, implying a bid-to-cover ratio of 4.1x considering an initial offering of $3.0 billion.
Overall, the DMO took advantage of the strong interest to sell $4.0 billion worth of Eurobonds ($1.0bn higher than initially planned) with the allotment across tenors printing at 7-year ($1.25bn at 6.125%), 12-year ($1.50bn at 7.375%) and 30-year ($1.25bn at 8.250%).
Consequently, proceedings from the secondary market were bearish average yield climbed by 28 basis points to close at 6.07%. On the other hand, analysts spotted the average yield declined by 12 basis points at the corporate Eurobond market to close at 2.60%.
“In the coming week, we expect to see slight see demand-led activities at the Eurobond market as investors seek to fulfil unmet demands from the auction”.
Currency Market: I&E window closes lower in the past week Last week, the naira closed shed 0.5% to close at the I&E window, at N414.9/ $1, whilst in the parallel market, we continued to find quotes in the region of N570-N580/$1 as dollar-naira levels remained elevated.
Regarding activity levels at the investors and exporters window, the average turnover at the window was down by 16.4% last week compared to print at $180.4.million, compared to $215.8 million in the prior week.
Analysts noted that the recent pressures observed at the parallel market continue to be driven by FX supply scarcity as BDCs become more competitive for dollar flows.
Read Also: Naira Steady at Investors Window as Foreign Reserves Rise
“In the absence of any CBN intervention, our short-term overview for the parallel market remains dim”, United Capital stated in a report. However, analysts said the outlook for the naira remains bright for the official window although we hold our position that the CBN may need to further devalue the Naira in the official window to see increased activity in the investors and exporters window.
Treasury Bills Spot Rates to Remain Steady as CBN Rollover N112bn
