The benchmark rate on Nigerian Treasury notes increased to 8.2% ahead of the Central Bank of Nigeria (CBN) primary market auction, which is likely to take place by midweek. Despite the fact that trade finished on a sour tone, the market started last week with strong purchasing momentum.
The fixed income market had a greater liquidity level at the end of last week’s trading sessions, which analysts anticipate will boost purchasing enthusiasm in the coming week. Meanwhile, the central bank would roll over maturing notes totaling N36.56 billion as part of its liquidity management operations.
These include 91-day bills for N2.78 billion, 182-day bills worth N3.02 billion, and 364-day bills worth N30.76 billion, according to investment experts’ notes. Trading concluded on a mixed tone as investors continued to search for inflation-protected naira assets investment amidst negative interest yield on fixed interest instruments.
Trading activity began on a high note, but as liquidity improved in the system, the bullish impetus faded. Cowry Asset Management analysts noted at the auction that they expect stop rates for these issuances to climb owing to tighter liquidity circumstances and anticipation that the CBN would reduce the interest rate corridor, leading interest rates to rise across the board.
Earlier this week, asset and fund managers upped their buying interest in government notes. However, the market finished the week on a down note. The overnight lending rate in the money market fell by 170 basis points to 1.7% last week as a result of an increase in liquidity.
This occurred after FAAC payouts. According to investment businesses and analysts, the FAAC allocation is worth N668.86 billion supported system liquidity despite cash reserve ratio (CRR) debits of about.N718.00 billion.
In its market update, Cordros Capital said the average system liquidity closed higher at a net long position of N804.77 billion compared with a net long position of N137.20 billion in the previous week.
Data from FMDQ showed that the overnight lending rate was depressed throughout the week until FAAC inflows hit the financial system. Analysts said they expect funding rates to remain low given ample financial system liquidity and additional inflows from OMO maturities worth N10.00 billion.
There is no expectation of significant outflows in the new week after the CBN slammed local lenders about N700 billion cash reserve ratio debit for not meeting loan targets.
Across market segments, analysts said the average yield advanced by 5 basis points to 8.0% in the NTB secondary market but declined by 3 basis points to 12.1% in the OMO segment. Investment analysts are envisaging sustained demand for T-bills in the secondary market on expectations of higher liquidity in the system.
