Unattractive yields push demand low in treasury bills market

TRADING IN THE TREASURY BILLS secondary market was sluggish last week as strained system liquidity conditions and unattractive yields hampered demand for instruments.

Because of this situation, the average yield across all instruments expanded by 17bps to 4.2 percent. Across the segments, yields widened at both the OMO and NTB markets, by 18bps and 7bps to 5.0 percent and 2.2 percent, respectively.

With liquidity conditions expected to improve this week, emand for instruments is expected to rise in this segment. At the NTB segment, most of the activity is expected at the primary market, as the CBN will roll over instruments worth NGN88.86 billion via auction.

The overnight (OVN) rate ended the week 57bps lower, week on week, but remained elevated at 16.1% as the absence of any significant inflows led to thin system liquidity.

This week, the OVN is expected to trend southwards, as system liquiditysimproved by inflows from OMO maturities (NGN157.23 billion).

Two weeks ago, the

Central Bank of Nigeria (CBN) mopped up a total of N90 billion last week through the sale of the Nigerian treasury bills at the primary market auction.

A breakdown of the figure shows that the CBN allotted N4.41 billion of the 91-day, NGN7.82 billion of the 182-day and NGN78.71 billion of the 364-day at the respective stop rates of 2.00 percent, 2.20 percent, and 4.02 percent.

Then, trading in the Treasury bills secondary market was mixed amidst the strain in system liquidity. Consequently, average yield across all instruments contracted by a marginal 3bps to 4.5 percent.

Activities in the relatively more attractive OMO secondary market were slightly bullish as average yield contracted by 10 basis points to 5 percent.

On the other hand, amidst the liquidity crunch, investors sold off at the NTB segment with average yield expanding by 6 basis points to 3.4 percent. At the PMA, analysts say yields on treasury bills are expected to contract, owing to the expected boost in system liquidity next week.

L-R: Abosede Lewu, executive director, Girslaide Initiative; Bruno Akpaibor, cluster head, ethics risk & compliance, Novartis; Osayi Alile, chief executive officer, ACT Foundation; Ogonna Oraegbunam, cluster head, patient access & public affairs, English West Africa, Novartis; and Ndifreke Okwuegbunam, director, grants and programmes, ACT Foundation, at the launch of the Novartis-ACT Foundation COVID-19 Response Initiative at the ACT Foundation Office in Lagos, recently