• Friday, March 29, 2024
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BusinessDay

Slight liquidity squeeze expected in absence of NT-Bill, OMO maturity this week

Nigeria’s inflation leaves T-Bills investors with little to cheer

The financial markets may experience slight liquidity squeeze as there would be no Nigerian treasury bills (NT-bill) and Open Market Operation (OMO) maturities this week.

Treasury bills are short term investment securities issued by governments to finance national borrowing requirements. OMO is the buying and selling of government security, which enables a central bank to control the supply of money in the banking system.

“In the absence of T-Bills and OMO maturities this weak, we expect liquidity level to be slightly tight as the Debt Management Office (DMO) holds May Bond Auction,” said Ayodeji Ebo, managing director, Afrinvest Securities Limited.

However, analysts at Afrinvest have recommended that investors seek other attractive opportunities such as available private money market offers like Commercial Papers (CP) in addition to cherry picking attractive instruments across the NT-Bills secondary market.

The Series 15 and 16 Commercial Paper issuance (“CP or the “Issuance”), under the Dangote Cement PLC (“Dangote Cement”) N150.0bn CP Issuance Programme is now open and scheduled to close on Wednesday, 20-May-2020.

“we expect sustained buying interest in the secondary market due to the unfilled bids from last week’s auction,” the analysts said.

Last week, the NT-bills at the secondary market kicked off on a calm note with investors trading cautiously in anticipation of the Primary Market Auction (PMA) that held on Wednesday. However, towards the end of the week, there was an uptick in activity levels as inflow (N209.0bn) from matured Open Market Operations (“OMO”) buoyed bullish sentiments leaving system liquidity at N388.5bn long on Friday.

Responding to BusinessDay, Ayodele Akinwunmi, relationship manager, investment banking at FSDH Merchant Bank Limited said, there is seems to be moderate liquidity in the market.

Average yield across all NT-Bill tenors declined by 38bps W-o-W to close at 2.3% with most buying interest skewed towards the medium and long term instruments, particularly the 10-Sep-20 (-80bps), 17-Sep-20 (-76bps) and 15-Oct-20 (-75bps) bills.

During the week, the Central Bank of Nigeria (CBN) offered N70.0bn worth of OMO bills to mop up excess liquidity in the financial system. However, there was “no sale” on all tenors despite the huge subscription of N344.2 billion.

A report by Afrinvest noted that in the NT-Bills space, the CBN on behalf of the DMO took advantage of the impressive subscription levels given the plan to focus on domestic borrowings, hence absorbed N142.8bn as opposed to the N33.8bn initially offered. As a result, stop rates on the 91- and 182-Day tenors closed higher at 2.5% (+65bps) and 2.85% (+36bps) respectively while the stop rate for the 364-Day tenor remained unchanged.

This week, the DMO is scheduled to offer N60.0bn across the 5-, 15- and 30-Year re-opening bonds on Wednesday.

“We anticipate a quiet trading session at the beginning of this week as investors prepare to position for the PMA. Investors are also advised to seek instruments with attractive yields that advanced last week,” the analysts said.