The Nigerian financial market will this week be awash with liquidity to the tune of N253.5 billion from maturing Open Market Operation (OMO) and the Nigerian Treasury bills.
A breakdown of the inflows as seen in a note from Afrinvest Securities Limited shows that N195 billion would be maturing from OMO bills while N58.5 billion would come from NT-bills.
However, the Central Bank of Nigeria (CBN) is expected to rollover the matured NT-bill at the Primary Market Auction (PMA) on Wednesday.
“Our advice is for local qualified investors to take advantage of available corporate offerings – Dangote Cement bond with effective yield range of 12.25% -12.50% and available Commercial Paper offerings expected during the week. On NT-Bills, mid-term bills that advanced last week can be cherry-picked by local investors,” analysts at Afrinvest said.
At the OMO market last week the CBN mopped up a total of N39.4 billion from the financial system liquidity which stood at N507.0 billion as at last week’s Thursday.
Read also: Maturing OMO bills to boost banking system liquidity to N862.7bn
The stop rates remained unchanged at 12.79 percent as investor demand continued to wane with no interest on short- and medium-term offerings.
The report indicated that there was a slowdown in the Nigerian Treasury Bills secondary market activities in the four trading sessions last week, with local investors more on the sidelines but mostly taking interest in long-term instruments and higher yielding corporate offers.
Consequently, average yield across all tenors closed flat with a slightly bearish bias up 9bps W-o-W due to sell-offs by some investors to take advantage of the relatively better offers.
Precisely, average yield across the mid-term bills gained 0.6% W-o-W while at the long end of the curve, yields shed 0.3% W-o-W on slight demand. The short-term bills however closed flat due to only trickles of trades at this end by retail clients. In more detail, the most declining bills were 11-Feb-2020 (-1.3%) and 28-Jan-2020 (-0.6%) while yields on 01-Oct-2020 (+1.6%) and 17-Sep-2020 (+1.2%) advanced the most.
At the bond market last week, positive expectations ahead of the OPEC+ meeting on possible oil production cut drove bullish sentiment across markets.
As more demand filtered into the FGN bond space, mostly from local investors, average yield across all tenors dipped 0.5% W-o-W to settle at 11.3%, sustaining the bullish run from the previous week. The short-term bonds declined the most, 0.8% W-o-W followed by the medium- and long-term bonds both dipping 0.4% and 0.3% W-o-W respectively. Most buying interest was witnessed on 14-Mar-24 (-1.8%), 27-Apr-23 (-1.4%) and 23-Mar-25 (-1.1%).
However, despite the OPEC+’s agreement to cut oil production to 9.7mbpd, Brent, the global benchmark still witnessed a marginal decline at $31.45 as at the time of this report.
The analysts expect reduced buying interests and a slowdown in activities by local bond players, as most investors are also cautious ahead of expected inflation data this week.
“We therefore advise investors to consider attractive corporate offers e.g. Dangote Cement bond, Axxela Bond and trade cautiously in the FGN bond space,” the analysts said.
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