Nigeria treasury bills rate to trend higher on N390bn liquidity shortfall

With the current liquidity level at N390.3 billion short, treasury bills rates are to trend slightly upwards during the week, according to market analysts.

They see the development calming the prolonged bullish run in the T-bills segment of the fixed income market.

“Going into the week, we expect rates to trend slightly higher following reduction in buy pressure resulting from panic caused by the easing stance of the Central Bank of Nigeria (CBN),” analysts at Afrinvest noted in a note to investors Monday, adding that an OMO maturity of N290.9 billion would ease liquidity pressure before the end of the week.

The treasury bills (“T-Bills”) market was bullish last week as rates across tenors moderated by a marginal 3bps to close at 10.7 percent w-o-w. Specifically, the short-term instruments declined 15 bps to close at 9.9 percent w-o-w, while the long-term bills inched 4bps higher to close at 11.4 percent w-o-w just as rates on the medium term instruments closed flat at 10.9 percent.

The CBN in the week under review continued its now accustomed once a week OMO auction offering N150.0 billion and N350.0 billion on the 105-day and 245-day tenors respectively. The auction received a subscription of N175.5 billion for the 105-day bill and N826.8bn for the 245-day bill.

However, N175.5 billion was allotted for the 105-day (1.2x) and N424.5bn for the 245-Day OMO (which were prorated by 50%). Consequently, System liquidity dropped sharply to N136.3bn negative after the OMO Auction on Thursday.

Also, the apex bank conducted a Primary Market Auction (“PMA”) last week Wednesday with stop rates averaging 11 percent.

In the FGN Bond market segment, performance was bearish last week as average yield across the various FGN Bonds trended higher by 23bps to close at 12.6 percent w-o-w on account of reduced buying pressures as well as reducing system liquidity.

The increasing rates were observed across all the different tenor categories as the short/medium term instruments yields expanded 27bps w-o-w to 12.5 percent while the long-term instruments inched up 8bps to 13.1 percent w-o-w.