Africa Debt: Nigerian treasuries seen rising on tight liquidity

Government debt redemptions are seen pushing Kenyan yields lower next week while Nigerian Treasuries could rise due to tight liquidity in the markets.

NIGERIA

Tight liquidity and banks’ lack of access to their credit balance at the Central Bank of Nigeria (CBN) could dampen demand next week at a debt auction where yields are seen climbing marginally higher than at the previous auction.

Technical glitches at the CBN have denied banks’ access to their balances with the regulator in the last four weeks, putting most dealers in the dark about the volume of liquidity available in the market to trade with.

Nigeria plans to raise 100 billion naira ($615.12 million) worth in bonds with maturities ranging between 3 years and 20 years at an auction next Wednesday.

At similar auction last month, the 3-year paper fetched 11 percent, 10-year paper attracted 12.19 percent, while the 20-year debt note fetched 12.14 percent.

Traders said they expected yields to inch up slightly to 11.05 percent on the 3-year paper and 12.20 percent on the 10- and 20-year paper due to expected weak demand and a lack of information to trade with.

“Liquidity has not been good, especially with the conduct of Open Market operations (OMO) by the central bank which soaked over 500 billion naira from the market and we expect this to be reflected at the auction next week,” said one dealer with Stanbic IBTC.

 KENYA

Yields on Kenyan Treasury bills are expected to inch lower next week as government debt redemption boosts money market liquidity, traders said.

The central bank will offer for sale 91-day, 182-day and 364-day Treasury bills worth a total 12 billion shillings ($136.75 million) next week.

Traders said at the prevailing interest rates, appetite for all maturities had slowed, which had pushed yields lower.

“We expect the liquidity position of most banks to improve by Monday following the inflow of government debt redemptions totalling 17.1 billion shillings,” said Alex Muiruri, fixed income analyst at Kestrel Capital.

Muiruri said he expected yields to nudge only about 10 basis points lower as few investors would be willing to bid for the benchmark 91-day paper if it was yielding below 8 percent.

At this week’s auction, the weighted average yield on the 91-day Treasury bills fell to 8.244 percent from 8.475 percent last week, while that on the 182-day bills eased to 8.700 percent from 9.296 percent.

The yield on 364-day bills also dipped to 10.273 percent from 10.330 percent last week. All the auctions were undersubscribed this week.