Combined T-Bills maturities of N536.3bn to drive liquidity, say analysts at Afrinvest

Omobayo Azeez

Investment pundits at Afrinvest Research have raised hope that system
liquidity in the treasury bills (T-Bills) market, valued at N34.9billion as at Friday, would experience boost in this new week.

According to the investment research firm, “Going into the week, we
expect to see a boost in system liquidity (N34.9 billion positive as at
Friday) on the back of a combined T-Bills maturities of N536.3 billion
from OMO (N356.5 billion) and PMA (N179.8 billion).

“As a result, we expect the CBN to intervene by mopping up excess
liquidity via OMO auctions.”

This week, the CBN is scheduled to roll over maturing bills worth N179.8 billion through another PMA across the 91-(N3billion),182-(N8.4 billion) and
364-Day (N168.4 billion) tenors.

Afrinvest experts therefore advised investors to take advantage of
T-Bills with attractive yields across the curve as well as primary
offerings this week.

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Last week, the treasury bills secondary market closed on bearish note as
investors sold off to take position in the Primary Market and OMO
auctions.

Consequently, average yield across all tenors advanced 8 bps week-o-week
(W-o-W) to settle at 13.4%.

Sell pressures were witnessed on the short and mid- segments of the
curve as average yield rose 5bps and 39bps respectively.

In last week’s Primary Market Auction (PMA), the CBN successfully
offered N158.7 billon worth of bills across 91-, 182-and 364-Day at
respective stop rates of 11.1 percent, 11.80 percent and 13.29 percent.

Consequently, the 91-, 182- and 364-Day instruments were oversubscribed
by 2.2x, 1.7x and 2.1x respectively.

In a bid to curtail possible excess liquidity in the system as a result
of expected high volume maturities, the apex bank issued OMO bills last
week.

“At the OMO auction, a total of N300.0 billion across the 91-,182- and
364-Day
tenors was offered and due to low allotment at Wednesday’s PMA, we
witnessed excess demand on the short- and long-term bills (2.8x and 1.9x
respectively) while the 182-Day bill was 0.3x undersubscribed.

“The CBN however prorated OMO winnings on the 364-Day bill by 69.6 per
cent due to the high level of bid,” said Afrinvest.

In the same vein, the bond market sustained its bearish run as average
yield trended northwards by 5 bps as a result of continued sell-off in
the market and asa result, average yield settled at 14.2 per cent W-o-W.

The medium-term instruments, particularly the 23-MAR-25 (+49bps)
witnessed the most sell pressure. On the flip side, the 13-FEB-24(-25bps) enjoyed a slight buying interest.

“This week, we anticipate a continued bearish trend in the bond market
as market activities might remain tepid. Thus, investors are advised to
cherry pick attractive instruments trading at a discount,” Afrinvest
concluded.