As expected due to volatility in the liquidity of the financial system, the Central Bank of Nigeria’s (CBN) primary market auction (PMA) on Wednesday finished with rates reduced across all Treasury bill tenors.
However, as naira assets continue to lag the inflation trend, liquidity situation has improved and traders have taken a large position in the local debt capital market in an effort to increase profits on their individual portfolios.
Given that the market is still in the mood for pricing the most recent interest rate rise, a number of fixed income market specialists had forecasted that the stressed liquidity situation will effect demand levels and expected a potential adjustment on spot rates on Treasury securities.
And because of the most recent pressures on gasoline prices, actual returns in the debt capital still remain substantially vulnerable to an elevated inflation rate that economists predict will increase much further (PMS).
According to the auction results, while 182-day and 364-day bills were priced lower despite the market’s limited liquidity, spot prices for 91-day Nigerian Treasury Bills (NTB) remained stable. READ Bond Declines, Treasury Holds After Increase in Policy Rate
However, traders had first cashed out their Treasury bill holdings before the central bank opened a midweek auction for subscription, which decreased the average yield on the short-term debt instruments.
The specifics revealed that on Wednesday, 182-day bills were sold for 8%, a significant decrease from the previous auction’s 8.05%, while 364-day Treasury notes were made available to market participants for 13.05%, a significant decrease from the previous auction’s 14.84%.
Analysts highlighted earlier this week that call, overnight, and repo rates ended within a range of 9% to 14% while opening market liquidity was recorded at N203.7 billion.
