Nigerian Treasury Bills’ (NTB) average yield marginally increased to 7% as cash-rich deposit money banks (DMBs), funds, and asset managers sold their holdings to meet liquidity needs.
According to market statistics, the financial system’s liquidity level has decreased, forcing up funding rates in the absence of greater inflows from maturing assets. The 10 billion Naira in matured OMO bills were not refinanced by the Central Bank of Nigeria.
The monetary policy committee is anticipated to raise interest rates in the coming week, according to data from FMDQ Exchange, which led to a rise in short-term benchmark rates. To reach 15.6%, the overnight lending rate rose by 300 basis points.
The Federal Government of Nigeria (FGN) bond auction in May 2023 debited the financial system this week for N368.15 billion, exceeding the N10 billion inflow from open market operations (OMO) maturities.
According to Cordros Capital’s market brief, as a result, the average system liquidity decreased to a net short position of N29.89 billion as opposed to a net long position of N660.01 billion the previous week.
This week, when local investors sought to raise money, the market’s low system liquidity caused activity in the secondary market for Treasury notes to become unfavorable.
As a result, the average yield across the market expanded by 33 basis points to 7.0%. This week, T-bills worth N180.45 billion will be auctioned by CBN via the primary market; viz: 91-day bills worth N9.96 billion, 182-day bills worth N1.82 billion, and 364-day bills worth N168.67 billion.
“We envisage lower yields … with system liquidity expected to be buoyant”, analysts said. The market expects liquidity in the system to improve over expected inflows from FAAC allocation worth N407.13 billion and FGN bond coupon payments totaled N17.87 billion.
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