Treasury Investors Cash Out Ahead of CBN Auction
Investors cash out on Nigerian Treasury bills’ holdings ahead of Central Bank’s primary market auction scheduled for Wednesday according to trading data from the debt capital market. The apex bank is expected to roll over more than N54 billion in maturing bills amidst tight liquidity in the financial system.
Given the previous pattern, treasury holders’ demand is expected to be influenced by the liquidity level in the financial system. The liquidity strain pushed short-term rates, according to money market data as rates were maintained at double digits as of Friday’s close.
Thus, the overnight lending rate expanded by 38 basis points to 13.0%, as the inflows from FGN bond coupon payments worth N5.63 billion and N25 billion from OMO maturities were insufficient to sustain the system liquidity, according to Cordros Capital.
Analysts noted that the average system liquidity settled higher in the just concluded week, printing a net long position of N146.41 billion from a net long position of N24.11 billion in the previous week.
Subscription levels at past auctions were influenced by liquidity level in the financial system and analysts maintain that the auction will attract higher demand as it is more likely that spot rates will adjust upward.
In the secondary market, traders said the Treasury bills secondary market ended on a bearish note despite the improved system liquidity. READ: Nigerian Treasury Bills Market Records Strong Demand
“We attribute this week’s bearish sentiments to participants taking profits from their positions in anticipation of the NTB PMA scheduled to hold next week”, Cordros capital told clients via email.
As a result, the average yield across all instruments expanded by 26 basis points to close the week at 10.8%. Recall that yield crossed the 11% mark before it reverted to the current level.
Across the segments, analysts noted that the average yield increased by 32 basis points to 11.0% at the treasury bills secondary markets, but contracted by 2 basis points to 10.1% at the OMO bills segment.
Projecting into the new week, analysts at Cordros Capital hint that yields on T-bills will maintain the same trajectory, following the expected tight system liquidity.
They said market participants will shift focus to the primary market auction on Wednesday where the CBN will roll over N54.36 billion worth of maturities. # Treasury Investors Cash Out Ahead of CBN Auction