System liquidity dynamics to sustain positive performance in T-bills market

The Central Bank of Nigeria’s policy bias for easing which has improved liquidity in the financial system is seen to sustaining the two-week long positive performance in the treasury bills and interbank markets in the near term, according to analysts.

They specifically see rates moderating further across the money market from earlier positions.

Indeed, the treasury bills market was bullish in the past week as average rate across tenors trended lower on all trading sessions. Specifically, the week opened on a positive note as the average rate across benchmark instruments fell 33bps to 12.9 percent from 13.3 percent in the previous trading session.

The following day, Tuesday, average rate further trended southwards declining to 12.6 percent. The bullish sentiment persisted till midweek with average rate across benchmarks marginally falling by 1bp to settle at 12.6 percent.

Nevertheless, the Central Bank of Nigeria (CBN) bank carried out a Primary Market Auction (PMA) where the 91-day (offered: N5.8bn, Subscription: N18.5bn, Allotted: N5.8bn), 182-day (offered: N29.2bn, Subscription: N46.5bn, Allotted: N29.2bn) and 364-day (offered: N23.4bn, Subscription: N374.0 bn, Allotted: N23.4bn) were allotted at stop rates of 10.9 percent, 12.0 percent and 12.1 percent respectively.

Average rates across benchmark tenors on Thursday closed down 17bps to 12.4% before settling at 11.8 percent on Friday down 1.46 percent week-on-week W-oW.

In the money market, the open buyback (OBB) and overnight (ON) rates declined W-o-W on the back of changes in system liquidity following OMO repayments and Primary Market Auctions (PMA), a trend which is seen entering this week.

Last week the market opened flat as the OBB and ON rates closed at 2.3 percent and 3.0 percent respectively, despite system liquidity decline of 35.6 percent (N860.7bn) to N476.4 billion from N1.3 trillion recorded the previous week due to the spillover effect of CBN’s OMO mop up of N500 billion.

On Tuesday, OBB and OVN rates declined 0.3ppts and 0.4ppts to close at 2.1 percent and 2.6 percent respectively as system liquidity moderated by N7.9 billion. The downward trend was maintained till midweek as OBB and OVN rates further fell to 1.8 percent and 2.3 percent respectively consequent on system liquidity which increased by N26.8 billion to N495.3 billion.

However, on Thursday OBB and ON rates inched 2.3ppts apiece to close at 4.1 percent and 4.7% respectively driven by OMO and Primary Market repayments of N276.1 billion and N116.9 billion respectively despite primary market sales of N56.5 billion on Thursday. System liquidity then surged by 110.1 percent (N545.5bn) to N1.0 trillion from N495.3 billion in the previous session.

At the OMO auction, the CBN issued 105-day (Offered: N100.0bn, Sale: N30.3bn) and 245-day (Offered: N300.0bn, Sale: N856.7bn) instruments at 10.9 percent and 12.0% respectively. OBB and ON rates closed lower by 1.1ppts and 0.9ppts to settle at 3.0 percent and 3.8 percent respectively.