The Central Bank of Nigeria is scheduled to roll over maturing bills worth N33.8bn through a primary market auction across the 91- (N3.4bn), 182- (N16.9bn) and 364-day (N13.5bn) tenors this week.
The CBN resumed its liquidity mop-up last week, offering a total of N570bn in three Open Market Operation auctions, with a total bid-to-cover ratio of 2.0x, 0.6x and 2.0x on the short-, medium- and long-term offerings. Thus, most demand was witnessed on the long-term bills despite rate moderations.
At the first auction on Monday last week, N300bn was offered across 108-, 199- and 353-day tenors with a total bid-to-cover ratio of 1.4x, while on Tuesday, N130bn was auctioned across the 93-, 205- and 331-day tenors and with a total bid-to-cover ratio of 1.3x.
At Thursday’s auction, a total sum of N140bn was offered across 91-, 175- and 336-day tenors, respectively, which recorded (2.3x) over-subscription on long-term bills while the short- and medium-term were under-subscribed by 2.0x and 1.0x, respectively.
Overall, the stop rates declined consecutively at each auction last week due to the high level of demand.
Last week, activities in the Treasury bills secondary market sustained a bullish trend on the back of bolstered system liquidity from the Federation Account Allocation Committee’s injections at the start of the week, as well as increased demand from offshore investors towards the end of the week.
Thus, the average yield contracted to settle at 12.9 per cent week-on-week, moving 21 basis points southward. Demand was largely witnessed in the medium- and long-term bills, causing yields to drop by 30bps week-on-week a piece.
On the flip side, the short-term bills advanced by 26bps week-on-week as sell-offs were experienced, especially on the 6-Jun-19 and 13-Jun-19 bills.
Analysts at Afrinvest Securities Limited said going into this week, a boost in system liquidity was expected on the back of T-bills and OMO maturities worth N33.8bn and N107.1bn, respectively.
They said, “In addition, the nomination of the CBN Governor, Mr Godwin Emefiele, will be positive for the fixed income market as we expect continued foreign exchange stability at current levels in the short to medium-term as well as guarantees the naira-settled OTC FX Futures will be sustained.
“Consequently, this will attract more foreign portfolio investors into the fixed income market, which may result in a further moderation in yields. We also anticipate that the CBN will continue its excess liquidity mop-ups via OMO auctions, which may relax yields across the curve.”
The bond market sustained its bullish outlook as average yield trended 20bps southward to settle at 14.1 per cent week-on-week as the medium- and long-term instruments enjoyed significant buying interests.
Consequently, high demand was witnessed on the 27-Apr-23 and 18-Jul-34, respectively.
Afrinvest analysts said the continued improvement in the bond market was anticipated as investors took a position on instruments with attractive yields.