In anticipation of the main market auction sales at the Central Bank of Nigeria (CBN), the secondary market purchasing of Nigerian Treasury bills (NTB) increased thanks to a healthy liquidity level.
On Wednesday, the CBN is slated to refinance debts worth a total of N182.85 billion. Numerous market analysts have predicted that the liquidity level will decline within the next week in their own forecasts.
According to Cowry Asset Management’s market research, as liquidity grew and banks with excess cash wanted lower rates, the Nigerian Inter-Bank Offered Rate decreased across all tenor buckets.
Benchmark short-term rates changed in a variety of directions. The overnight lending rate decreased by 37 basis points to 11.88% while the open repo rate remained constant at 11.50%. Strong liquidity brought rates down on a weekly comparison. Due to the increased system liquidity from the previous week, the overnight rate decreased by 138 basis points.
Additional inflows from OMO maturities at N20.00 billion and FGN bond coupon payments worth N5.63 billion helped to maintain the market’s liquidity level. The average system liquidity concluded at a lower net long position of N184.17 billion, as compared to the net long position of N339.93 billion the previous week, according to Cordros Capital Limited’s market note.
Analysts predicted that system liquidity would be under pressure the next week in the absence of any sizable inflows, forcing the overnight lending rate to trend higher than it is at the moment.
In the secondary market, Nigerian Treasury bills rallied again as the healthy system liquidity continued to support buying interest for bills across the market. Consequently, the average yield contracted by 44 basis points to 6.4%, according to fixed income analysts report reviewed by MarketForces Africa. >> Nigerian Treasury Bills Yield Rises to 7%
Analysts at Cordros Capital said they noticed particular interest for the 97-day to maturity (109bps), 251-day to maturity (-144bps), and 300-day to maturity (-100bps) bills, respectively.
Buying interest in 97-day-to-maturity bills dragged yield lower by 109 basis points. Investors’ interest in 251 days to maturity dragged the yield curve by 144 basis points. Then, the 200-day to-maturity yield declined by 1%.
“We believe yields in the NTB secondary market will tilt northwards, following our expectations for depressed system liquidity.
“Notwithstanding, we expect market participants to shift focus to the NTB PMA on Wednesday where the CBN is scheduled to roll over N182.85 billion worth of bills”, analysts at Cordros Capital projected.