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Benchmark yield dips after investors stake N1.54tr on T-Bills

The average on Nigerian Treasury bills (NTB) slumped to 8.2% after higher spot rates were offered at the Central Bank primary market auction conducted last week. In the secondary market, there was a buying momentum in the Nigerian T-bills despite as steep tight in the financial system liquidity.

The money market short-term interest rates benchmark worsened despite inflows from FGN bonds coupon payments and FAAC inflows. The overnight (OVN) rate expanded by 541 basis points to 25.2%, according to data from FMDQ cited by analysts.

The FGN bond coupon payment worth N112.67 billion was insufficient to support the financial system’s liquidity. Towards the weekend, the market recorded N966.11 billion FAAC inflows. The market was debited for N283 billion NTB auction settlement.

Consequently, the average system liquidity closed this week at a net short position of N203.48 billion versus a net long position of N187.44 billion in the previous week, according to Cordros Capital. Open Repo Rate (OPR) and Overnight Rate to climb to 24.25% and 25.20% respectively.

“We attribute this week’s performance to market players moving to the secondary market to cover for lost bids at the NTB auction and looking to deploy their funds in the absence of an OMO auction this week”, Cordros Capital told investors in its market update.

Across the market segments, the average yield declined by 21 basis points to 8.2% in the NTB segment and contracted by 2 basis points to 11.2% in the OMO bill secondary market.

At the primary market auction, the CBN offered participants instruments worth N303.22 billion, The offer was split as N9.96 billion for the 91-day, N10.21 billion for the 182-day, and N283.04 billion for the 364-day bills.

Traders said the auction was massively contested as the total subscription settled at N1.54 trillion (bid-to-offer: 5.1x). Eventually, the CBN allotted exactly what was offered – at respective stop rates of 5.19% (previously: 5.00%), 8.00% (previously: 5.90%), and 13.97% (previously: 9.80%).

Analysts said they envisage lower yields in the Treasury bills secondary market as we believe anticipated inflows into the financial system will drive bill demand.

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