NTB rates expected to be moderate this week as N565.52bn inflow hits the market

TREASURY BILLS RATES are expected to take a moderate stance this week as the market anticipates inflow of N565.52 billion.

The market expects OMO maturities worth N282.88 billion, and treasury bond maturities worth N233.90 billion, as well as bond coupon to the total of N48.74 billion.

Last week, Open Buy Back (OBB) and Overnight (OVN) rates closed at 16.0 percent and 16.8 percent respectively, from 11.4 percent and 12.4 percent recorded the previous Friday as system liquidity declined to N79.5 billion.

On the first trading day, the rate settled 4.36 points higher at 16.8 percent as system liquidity thinned out. However, by the second trading day, the rate moderated by 7.65 points, before then further paring by 12.00 points on the following trading day to 4.8 percent, following CRR refunds to banks by the CBN.

On the penultimate trading of the week, the rate increased by 8.36 points to 13.14 percent, despite inflows of N463.98 billion from OMO maturities, as investors looked to re-invest in an OMO auction called by the CBN on the same day.

Trading in the Treasury bills market was seemingly bullish as the average yield across instruments pared by 17 basis points to 12.4 percent, as investors took positions in the market amidst relatively buoyant liquidity.

Also, the CBN held an OMO auction during the week, on the 17th of October for instruments worth N430.00 billion, offering 91DTM (Offered: NGN30.00 billion; Allotted: NGN14.31 billion), 182DTM (Offered: NGN50.00 billion; Allotted: NGN36.29 billion) and 364DTM (Offered: NGN350.00 billion; Allotted: NGN370.00 billion), at respective stop rates of 11.59 percent (previously 11.59% auction), 11.79 percent (previously 11.79% auction) and 13.35 percent (previously 13.39%).

Similar to the auction in the upper week, the level of bids on the long tenor instrument was significant, with total subscriptions settling at N1.07 trillion.

Speaking on events of the week and outlook for this week, Cordros Capital said, “During the week, the CBN gave banks a directive to cease sales to clients with outstanding loans with any bank, as well as corporates which were benefitting from CBN intervention funds. While we don’t expect to see an immediate impact in the market over the short-term as banks will need to work out the methodology for identifying debtors across institutions, the long-term implication should be weaker demand, which will keep yields elevated.”

“In the coming week, OMO and Treasury bond maturities worth N282.88 billion and N233.90 billion respectively, as well as bond coupons worth N48.74 billion are expected to boost system liquidity this week, and should keep the rate moderated by the end of the week,” they added.

On their part, Analysts at Afrinvest opined that with the expected increase in system liquidity, CBN will sustain its OMO auction this week, to keep liquidity in check

Afrinvest said, “We expect the CBN to sustain its OMO auction given that OMO maturities will impact system liquidity levels. Also, we envisage that elevated system liquidity levels would continue to drive rates lower in the secondary T-Bills market.”