Yield on Nigerian Treasury Bills Falls Ahead of Auction
The average yield on Nigerian Treasury bills tracks lower amidst sustained pressures in the financial system liquidity ahead of Central Bank (CBN) primary market auction this week.
Nigeria’s central bank is expected to roll over N141.34 billion worth of instruments across 91-day, 181-day and 364-day auction with the expectation that spot rates will be steady as the members of the monetary policy committee meet.
The yield curve is expected to remain muted on the expectation that market participants will pause to weigh and price in information from the rollover auction midweek as well as interest rate direction into their respective portfolios building.
“There will be a change in strategy to match the change in market dynamics…rising inflation means that the apex bank will step up on liquidity control – but that is dangerous as it will out rightly impact private sector growth”, analysts told MarketForces Africa.
At the previous auction earlier in the month, there were spot rates adjustment on long and mid-tenored instruments, driven by higher demand following a relatively lower pressures on liquidity in the market.
In the money market last week, there was pendulum-like swings on short term rates which were in double-digit levels due to low maturing inflows.
Local banks scramble to keep their respective regulatory liquidity requirement as high, solid and strong while cash-rich lenders’ demanded higher interbank rate.
Data from FMDQ Exchange shows that the lending overnight rate settled in the double-digit region through the week, hitting 15% on Friday following 483 basis points increase above the previous week.
In a market report, Cordros Capital said the average liquidity level settled lower at a net short position of N26.87 billion as against N212.55 billion in the previous week.
Total debits of N261.50 billion was made on the system liquidity for the FGN bond and FX auctions payments. These debits offset the inflow from FGN bond coupon payments worth N157.84 billion.
“We expect the overnight rate to maintain its upward trend next week as we believe the outflow from CBN’s auctions and possible cash reserve ratio debits may outweigh the expected inflow from FGN bond coupon payments worth N131.20 billion”. Cordros Capital analysts projected. READ:Treasury Yield Prints 3.4% as Bond Tracks Higher
In the secondary market for trading Nigerian Treasury bills, trading activities were bullish with pockets of transactions across tenored as investors seek windows to lodge funds.
Market analysts at Cordros Capital said the ample system liquidity, specifically at the beginning of the week, supported participants’ demand for Nigerian Treasury bills – then, yields tracked lower.
As of Friday’s close, the average yield across all instruments contracted by 37 basis points to 8.0%, according to Cordros Capital analysts report. In the same vein, the average yield at the OMO bill segment dipped by 113 basis points to 9.4%.
Following the expected tighter liquidity in the system next week, traders said they expect bearish sentiments to dominate the T-bills market and drive higher yields.
# Yield on Nigerian Treasury Bills Falls Ahead of Auction#
