T-bills rate seen rising on rollover of maturities

As investors continue to favour long tenored treasury bills over shorter tenors, analysts say they expect higher rates to be sustained into this week’s trading especially as a total of N182.2 billion T-bills maturity is expected to hit the system with the same amount planned to be rolled over in 91-day (N5.4bn), 182-day (N8.4bn) and 364-day (N168.4bn) maturities.

Activities at the treasury bills market were bearish as market players sold off aggressively on the back of expectation of further rate hikes at the OMO auctions. Consequently, average yield rose by 208 basis points week-on-week to 14.43 percent.

Sell pressure was spread across the curve, short (+281 bps), mid (146 bps), long (144 bps), amid selloffs of the 13DTM (+761 bps), 111DTM (+201 bps), and 307DTM (+179 bps) bills, respectively.

Last week’s NTB auction, the CBN fully allotted NGN136.31 billion worth of bills, N6.22 billion of the 91-day, N4.00 billion of the 182-day, and N126.09.00 billion of the 364-day at respective stop rates of 11.00 percent, 12.30 percent, and 13.50 percent all the same as prior week. Demand was stronger compared to the previous auction, with total bid-cover of 1.57x compared to previous bid cover of 1.00x.

The CBN conducted OMO auctions on Monday with N21.7 billion for 199 days at a marginal rate of 12.5 percent and Tuesday, N300 billion for 198 days at marginal rate of 12.5 percent and N81.7bn for 324 days at marginal rate of 13.2 percent, mopping up a total of N403.4 billion from the system.

Interestingly, the Apex bank stuck to its perceived normal rate for maturities less than 6 months (≤12.5%) as well as maturities higher than 6 months but less than one year (≤13.5%).

Following the Treasury bills auction on Wednesday, system liquidity opened Thursday at N384.0 billion, notwithstanding the OMO maturity of N240.6 billion that hit the system, while the open buyback (OBB) and overnight (OVN) rates inched higher to 10.3 percent and 11.1 percent respectively.

 The week on week drop in liquidity influenced the OBB and OVN rates, which eventually closed the week at 10.7 percent and 12.0 percent respectively.