The financial markets resumed today after the Independence holiday with expectations of N134.0 billion worth of maturing treasury bills (T-Bills) to be rolled over at the primary market by the Central Bank of Nigeria (CBN).
The market also awaits inflows from Open Market Operation (OMO) maturity worth N472.4 billion to be auctioned on Thursday by the CBN. These inflows are expected to boost the system liquidity.
“We expect to see more investors position at the longer end of the curve,” said analysts at Afrinvest Securities Limited.
The analysts advised investors to take advantage of T-Bills with attractive yields across all tenors in the primary and secondary markets as well as potential OMO offers.
Last week, the T-Bills secondary market reversed its two-week bearish run on the back of improved system liquidity (N260.0bn long as at Tuesday) stemming from a FAAC disbursement (N341.0bn) which hit the financial system the previous Friday. In addition, OMO maturities worth N422.0bn further buoyed system liquidity, spurring buying interests particularly on the medium and longer end of the curve – 26-Mar-20 (-129bps), 02-Apr-19 (-113bps) and 11-Jun-20 (-93bps). Consequently, average yield across all tenors closed at 13.3 percent W-o-W, 34bps lower than 13.6 percent the previous week.
Despite improved system liquidity, the CBN conducted a much-anticipated OMO auction once last week, offering a total of N250.0bn on Thursday across the 84-day (N20.0bn), 184-day (N30.0bn) and 364-day (N200.0bn) tenors. The short- and medium-term maturities were 98.5 percent and 93.0 percent undersubscribed, respectively, as bills with similar tenors commanded high rates in the secondary market. However, the 364-day bill was 339.0 percent oversubscribed (N200.0bn offer vs. N678.3bn subscription) as more investors positioned on the longer end of the curve.
As a result, the apex bank prorated all successful bids by 44.0 percent allotting a total of N300.0bn to investors. Consequently, on Friday, the yield on longer-dated T-Bills shed 30bps as investors with unfilled bids from the auction (c.N378.3bn) positioned in these instruments with more demand on the 17-Sep-20 bill.
Ayodele Akinwunmi of FSDH Merchant Bank Limited said over N9.6 trillion worth of government securities are expected to mature in the financial market between August and December this year.
The total NTBs issued and allotted in the first half-year 2019 was N1.5 trillion apiece, indicating a decrease of N179.52 billion or 10.86 percent below N1.653.37 billion apiece in the corresponding period of 2018, according to the half-year activity report by the CBN on Monday.
The decrease was attributable to fewer NTB issues in the review period. Total public subscriptions stood at N4,153.63 billion, compared to N3.2 trillion in the corresponding period of 2018. The rise in public subscription was traceable to the increased level of liquidity in the system and the favourable appetite for government securities.
The holding structure of the instrument indicated that Deposit Money Banks (DMBs) and foreign investors took up N766.37 billion or 52.00 percent, mandate and internal funds customers (including CBN branches) N581.08 billion or 39.43 percent, CBN N73.45 billion or 4.98 percent, and merchant banks N52.94 billion or 3.59 percent.
The successful bid rates in the market as shown in the report ranged from 9.60 to 11.00 percent for 91-day, 11.89 to 13.50 percent for 182-day, and 12.02 to 15.00 percent for 364-day tenors. The range of successful bid rates in the corresponding period of 2018 was higher, between 10.00 to 12.55 percent for the 91-day and 10.30 to 13.93 percent for the 182-day, but lower for the 364-day tenors at rates between 10.70 and 14.30 percent.
HOPE MOSES-ASHIKE
