Yields Plunge in Treasury Bills Market amid Excess Liquidity

Yields Plunge in Treasury Bills Market amid Excess Liquidity

Yields on government instruments trend lower in the secondary T-Bills market last week as Central Bank refinanced matured instrument worth ₦59.37 billion via primary market.

Open buy back and overnight rate opened at 15.0% and 15.6% respectively, same as previous week’s close as system liquidity stood at ₦112.4 billion.

However, on Thursday, as open market operation (OMO) maturities worth ₦303.3 billion flooded the system, the rates trended lower to 2.7% and 3.4% respectively.

Afrinvest stated that by the close of the week, OBB and OVN settled at 2.20% and 3.00% in that order as system liquidity closed at ₦204.3 billion.

Meanwhile, at the primary market auction, the CBN issued instruments worth ₦59.4 billion across the term structure.

The marginal rates across tenors closed at 2.45%, 2.72% and 4.02% for the 91-day, 182-day and 364-day tenors respectively.

But demand was tilted to the 128-day instrument with a bid-to-cover ratio of 2.9x, Offer was ₦19.2 billion while subscription was ₦55.2 billion; and eventual sale settled at ₦19.2 billion.

Similarly, the 364-day was oversubscribed at 1.9x on total offer of ₦19.8 billion while subscription was valued at ₦37.9 billion; and sale settled at ₦19.8 billion.

For 91-day, it was also oversubscribed at 1.8x with total offer of ₦20.4 billion; while subscription was ₦37.5 billion; and sale closed at ₦20.4 billion.

Last week, the CBN also held an OMO auction on Thursday, offering a total of ₦160 billion across three instruments to keep liquidity in check in the face of huge maturities.

Investors again preferred the long-term instruments as it recorded over subscription with bid-to-cover ratio of 3.8x.

For the long term instrument, a total offer of ₦60.0 billion was made, but subscription came at ₦230.3 billion while sale settled at ₦60 billion.

Also, the short term instrument offer of ₦50.0 billion was call while subscription totaled ₦67.2 billion was received but sale was ₦4.0 billion.

For the mid-term, offer was ₦50.0 billion, subscription ₦57.5 billion; and eventual sale was ₦50 billion bills were oversubscribed at 1.3x and 1.2x respectively.

The 89-day, 194-day and 348-day instruments were issued at stop rates of 7.00%, 8.75% and 9.90% respectively.

Afrinvest stated that this was significantly lower than previous auction rate at 11.50%, 11.54% and 12.71%.

Stop Rates Move in Mixed Directions

In its note on the activities in the money market last week, Cowry Asset stated that CBN refinanced matured T-bills worth ₦59.37 billion via Primary market at lower rates for most maturities last week.

The firm stated that stop rates for the 91-day bills and the 182-day bills fell to 2.45% from 2.50% and 2.72% from 2.85% respectively.

However, the 364-day bills rose to 4.02% from 3.84% as ₦114 billion worth of instrument was auctioned via OMO.

Meanwhile, ₦303.17 billion worth of T-Bills matured via OMO which, combined with the primary market maturities (₦59.37 billion).

This resulted in total inflows worth ₦362.55 billion.

Hence, the net inflows worth ₦248.55 billion led to a boost in the financial system liquidity as NIBOR for overnight funds fell sharply to 3.50% from 12.06%.

However, NIBOR for 1 month, 3 months and 6 months tenor buckets rose to 5.87% from 5.68%, 6.12% from 6.04% and 6.99% from 6.65% respectively.

Then, NITTY moved northwards for all maturities tracked amid renewed bearish activity: yields on 1 month, 3 months, 6 months and 12 months maturities rose to 2.08% from 2.05%, 2.26% from 2.13%, 2.66% from 2.59% and 3.56% from 3.49% respectively.

In the new week,T-Bills worth ₦155.83 billion will mature via OMO; hence, we expect interbank interest rates to increase amid boost in financial system liquidity.

Yields Plunge in Treasury Bills Market amid Excess Liquidity