Nigeria system liquidity levels to spur buy interest ahead of PMA

Nigeria system liquidity, which was bolstered by maturing open market operation (OMO) bills of N244.0 billion last week and the non-conduct mop-ups by the Central Bank of Nigeria (CBN) may spur buy interest in government bonds and T-bills ahead of the primary market auction (PMA) scheduled for Wednesday, according to market analysts.

The CBN will be conducting another PMA this week rolling over N66.7 billion, which would offset the effect of the maturing T-Bills worth the same amount.

“We expect the PMA stop rates to remain at last week’s levels. Also, OMO maturities of N377.6 billion will further strengthen liquidity levels which we anticipate would be mopped up by the CBN’s OMO auction,” say analysts at Afrinvest Research, adding that buy interest would dominate the first trading sessions of the week, which would driving rates further down.

The bullish trend in the treasury bills (‘T-Bills”) secondary market was sustained last week as average rate across tenors declined 20bps w-o-w to 12.0 percent, which saw most demand at the shorter end of the curve with rates declining 36bps w-o-w as investors scavenged the 21-Jun-18 and 05-Jul-18 maturities, both decreasing 1.2 percent and 1.0 percent respectively.

In the same vein, the medium and long-term bills shed 18bps and 6bps respectively.

The CBN PMA last Wednesday was moderately subscribed as the 91-day bill was wholly subscribed while the 182 and 364-day bills were oversubscribed by 1.1x and 1.5x respectively. There was an increase in stop rates across all tenors – the 91 and 182-Day bills appreciated 20bps apiece while the 364-day bill improved 50bps.