Expected N151b treasury bills maturity keeps rates steady

The interbank lending rates, which were earlier projected to trend northwards this week as the Central Bank of Nigeria (CBN) resumed its intermittent Open Market Operations (OMO), may be steadied with another monetary policy action, expected to run simultaneously.

Reason: Though there is a net Treasury Bill  (T-Bills) maturity worth N150.6 billion expected to hit the system by Thursday, the impact of this increased liquidity levels is however expected to be off-set by a rollover of the same net amount, leaving the money market rates even, although at higher rates.

The high rates’ development, which dominated activities last week, saw average treasury bills trending at higher rates just like the Open Buy Back (OBB) and Overnight rates.

Average T-bills rates, which opened the week at 7.9 per cent, dropped to 7.8 per cent on the back of increased buying interest, but rise again by 0.1 per cent to 7.9 per cent on the back of the OMO auction floated by the CBN.

The rates later rose further to eight per cent by Thursday, as the CBN mopped up another N49.2 billion from the system and eventually ended the week at 8.2 per cent.

Amid expectations of inflows to hit the financial system, money market rates started the week lower than Friday’s closing rates with OBB and Overnight rates dropping one per cent and 0.9 per cent to settle at 3.5 per cent and 4.1 per cent at the end of Monday’s trading session.

Both rates dropped further to three per cent and 3.3 per cent on Tuesday on the back of the inflow from refunds by CBN for unfulfilled bids of foreign exchange by banks.

By mid-week, the two interbank lending rates however trended upwards to 3.3 per cent and 3.8 per cent respectively as a result of the CBN’s mop-up of N56 billion from the financial system through OMO auction.

The rates defied OMO maturity of N96.4 billion and N49.2 billion mop-up exercise on Thursday, remaining at mid-week levels, until Friday when both settled at 3.1 per cent and 3.7 per cent, perhaps on low activities as the week draws to end.

Meanwhile, amid the volatility in the financial market, Afrinvest Securities Limited said its analysis showed that the domestic bond market is equally being pressured by investor sentiments.

“Our analysis of the bonds market performance in sampled emerging markets showed that three of Nigeria’s local bonds are the worst performing year-to-date. This is not unconnected with the challenges the economy is currently facing, coupled with monetary policy volatility that has weakened investor sentiments.

“On a global front however, it is worthy of note that the Nigerian Sovereign dollar denominated Eurobonds have performed positively year-to-date, picturing polarity of sentiments in the pricing of Nigeria’s local and foreign bonds. Nonetheless, we note that local institutional investors like the Pension Fund Adminjstrators, banks and insurance companies will continue to find the bonds market more attractive,” it said in a statement.

Last week, activities in the bonds market were mixed as average yields across benchmark bonds opened the week at 12.4 per cent from 12.6 per cent it ended the previous week, with increased buying activity observed on the 20-year benchmark bond (FGN MAR 2036).

Average yield rose by 0.2 per cent to settle at 12.6 per cent by mid-week, amid selling activities across board and while the bonds market was generally quiet by Thursday, average yield across benchmark bonds rose one basis point, eventually settling at 12.7 per cent on Friday.
“This week, we expect yields to rise across board as Pension Fund Administrators and institutional investors reposition their portfolios for the new month,” an investment researcher, Ayodeji Eboh, said.