The Central Bank of Nigeria (CBN) will today (Wednesday) offer to investors N111.11 billion worth of Treasury-Bill at the Primary Market Auction (PMA).
The Nigerian Treasury-Bill (NTB) consists of N20.37 billion for 91-day tenor, N38.75 billion for 182-day and N51.99 billion for 364-day tenor.
The auction is likely to witness an oversubscription with a slight moderation in stop rates due to abundant system liquidity and a relatively low yield environment in the secondary market, according to financial market analysts at FSDH Merchant Bank Limited.
The financial system liquidity stood at N1.2 trillion last week from all maturing investments – NT-Bills, Open Market Operation (OMO) and FGN bond.
However, the regulator last week mopped up N300.0 billion from the excess liquidity via its usual OMO auction.
A report by FSDH Research shows that the T-Bill market ended the trading session on a positive note on Tuesday, with average yields declining by 21 basis points to 3.90 percent as against 4.11 percent.
The average yield across long-term maturities declined by 40 basis points, while average yields across short-term and medium-term maturities remained unchanged. The fall in average yields was led by the NTB 14-Jan-21 (-110bps), NTB 26-Nov-20 (-77bps), and NTB 12-Nov-20 (-67bps) maturities, which witnessed maximum buying interest.
Overnight inter-bank rate declined by 0.23 percent to close at 3.07 percent on Tuesday as against 3.30 percent. Also, the Open Buy Back (OBB) rate declined by 0.11 percent to close at 2.29 percent on the same day, from 2.40 percent on the previous day.
The average OMO yields declined by 35 basis points to 11.31 percent on Tuesday as against the last close of 11.66 percent. Buying interest was witnessed across short-, medium- and long-tenor maturities, with average yields compressing by 57 basis points, 37bps, and 17bps, respectively. Yields on 22 bills fell, with the 14-May-20 maturity bill recording the highest yield decline of 256 basis, while yields on 5 bills advanced with the 10-Nov-20 maturity bill registering the highest yield increase of 11 basis points.
Analysts at Afrinvest Securities Limited believe the offer will be significantly oversubscribed due to expected buoyant liquidity on OMO and NT-Bills maturities worth N1.1 trillion and unattractive secondary market alternatives. Thus, a slight moderation in stop rates and high oversubscription are very likely.
The Nigerian Treasury Bills secondary market last week turned bearish as Afrinvest analysts saw some local investors sell off their NT-Bills ahead of the FGN bond auction last Wednesday, while other locals stood on the sidelines, indifferent, amid unattractive secondary market offerings.
Consequently, average yield on all instruments trended 7bps northwards Week-on-Week to close at 3.9 percent. Long-term and short-term bills suffered sell-offs advancing 1.0 percent and 0.3 percent, respectively. On the flipside, the medium-term NT-Bills dipped 14bps as slight buying interest persisted.
HOPE MOSES-ASHIKE
