TBill rate shifts as liquidity situation worsen
By Kayode Tokede
Treasury Bills (TB) secondary market closed on a bearish note following a slow trading record in the fixed income market. Consequently, the average yield across all instruments increased by three basis points to 8.4per cent last week.
Specifically, analysts at Cordros Capital sees average yield at the Nigerian TB segment edge higher by four basis points to 6.6percent across the market segments.
Elsewhere, analysts spotted that the average yield at the OMO segment contracted by 5 basis points to 9.9percent given improved demand in the secondary market following the CBN’s two-week hiatus from the primary market.
Analysts at Cordros Capital highlighted in an email sent to clients that the CBN returned to the market this week, and sold N17.00 billion worth of OMO bills to market participants and maintained the stop rates across the three tenors, as with prior auctions.
“In the coming week, we expect the average yield on T-bills to decline as we envisage improved system liquidity. Also, we expect quiet trading at the NTB market as participants’ position for next week’s primary market auction (PMA) with the CBN set to roll over N109.43 billion worth of maturities.”
In the bond market, bearish sentiments also returned to the bonds secondary market as demand for the short and mid dated instruments weakened.
Specifically, average yields expanded by eight basis points to 11.7 percent. Across the benchmark curve, it was noted that average yield inched higher at the short (+4 basis points) and mid (+20 basis points) segments.
The uptick came following sell-offs of the JAN-2026 (+25basis points) and NOV-2029 (+27 basis points) bonds, respectively; while it pared at the long (-3bps) end following sustained buying interest in the APR-2037 (-13bps) bond.
On Wednesday, the debt management office (DMO) published the Q3-21 bond issuance calendar, which showed no changes in volumes offered.
However, the short and mid dated instruments were changed to the FEB-2028 and MAR-2036 bonds, respectively (previously MAR-2027 and MAR-2035).
“In the coming week, we maintain our expectations of lower yields as investors take positions ahead of the maturing JUL-2021 bond,” analysts projected.
Also, we expect the release of the June 2021 CPI which Cordros analysts projected to print at 17.83percent to further shape market sentiments and the direction of yields.
In a related development, Nigeria’s foreign reserves sustained its decline, dipping $113.15 million week on week to $33.12 billion as naira depreciated by 0.1per cent to N411.75 to a dollar at Investors and Exporters window.
The local currency also lose ground at the parallel market, depreciated 0.4 basis points to N505.00 to a dollar. At the Investors and Exporters window, total turnover decreased by 24.5 percent in five days to US$526.79 million, with trades consummated within the N400.00 – 420.86/USD band.
However, in the forwards market, the rate was flat at the 1-month (N413.52/USD) contract but appreciated across the 3-month (+0.1% to N417.65/USD), 6-month (+0.1% to NGN423.69/USD) and 1-year (+0.1% to N435.54/USD) contracts.
“We expect improved liquidity in the IEW over the medium term, given our expectation of increased oil inflows in line with the rise in crude oil prices, and (inflows from FCY borrowings. Accordingly, we expect the naira to remain relatively range-bound (N410.00 – N415.00) at the Investors and Exporters window,” Cordros said.
