Investors expect higher rate as CBN pays maturing treasury bills Wednesday

Ahead of payment of maturing treasury bills worth N167.2 billion on Wednesday by the Central Bank of Nigeria (CBN), investors are expecting a higher stop rate for the various tenor buckets.

For the long term (364-day) tenor instrument, investors anticipate 7.0 percent interest rate, which is 0.51percentage point higher than 6.49 percent stop rate offered by the CBN on the previous auction, data from the Afrinvest Securities Limited show.

Nigerian Treasury Bills (NTB) as defined by the CBN are short-term securities issued at a discount for a tenor ranging from 91 to 364 days, such that the income received is the difference between the purchase price and the amount received at maturity or prior to the sale.

At the Primary Market Auction (PMA) on Wednesday the CBN will roll over a total of N164.1 billion for 364-Day tenor instruments, N790 million for medium-term (182-day), and N2.3 billion for short-dated (91-Day) tenor instruments.

Consequently, investors expect a 0.11 percentage increase of 4.0 percent stop rate as against 3.89 percent offered previously for the medium term instrument and 0.50 percentage points increase to 3.00 percent compared with 2.5 percent stop rate offered in the previous auction for the short-dated instrument.

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“We expect a bearish performance in the NT-Bills secondary market as investors focus on the PMA slated for Wednesday and anticipate that yields expand further. Thus, we maintain our advice that investors position in relatively attractive maturities along the curve especially on short and mid-dated bills and take advantage of attractive corporate offerings that may come up, analysts at Afrinvest said.

The treasury bills market opened the week with mixed sentiments recorded across the NTB and Open Market Operation (OMO) curves following the commencement of the 2-way quote trading. Most interest was seen on the short to mid end of the curve. Also, activity was notable across the Special bill papers as players sought for attractive levels, according to a report by Parthian Partners, Africa’s premier inter-dealer broker.

“We expect continued mixed sentiments in today’s session even as players anticipate the PMA scheduled for tomorrow,” said analysts from Parthian Partners.

The Overnight (O/N) rate increased by 0.08 percent to close at 7.08 percent as against the last close of 7.00 percent, while the Open Repo (OPR) decreased by 0.33 percent to close at 6.33 percent as against the last close of 6.66 percent, a note from the FSDH Research noted.

“We expect rates to hover around current levels barring any significant funding event,” analysts at Parthian Partners said.

At the Nigerian Treasury Bills secondary market last week, performance remained bearish despite buoyant system liquidity, which stood at N463.4 billion in the positive as at Wednesday (1-Jun-22) last week on the back of selloffs from investors. Consequent on this, average NT-Bills yields advanced 9bps Week-on-Week to settle at 3.97 percent from 3.88 percent the previous week.

In more detail, sell-offs were recorded on most tenors across the curve, especially on the mid-dated bills that expanded 17bps W-o-W. Particularly, the 8-Sep-22, 10-Nov-22 and 27-Oct-22 bills advanced the most by 58bps, 43bps and 25bps W-o-W respectively.