Sustained Bullish Trend to Push Rates Lower as PMA Holds on Wednesday; Indicative Rates


Monday, March 19, 2018 /12:10 PM /Afrinvest 

Performance in the Treasury Bills ("T-bills") market last week was bullish as investors reacted to the T-Bills auction calendar for Q2:2018 released by the CBN. The calendar indicates that the Federal Government plans to 
roll over half of the total amount maturing (N482.0bn rollover vs. N964.0bn maturing) in a bid to reduce its borrowing costs.

Consequently, average yield across all tenors particularly the short (12-Apr-18) and medium term (14-June-18) maturities declined by 31 bps to close at 13.4% as investors hurriedly took positions to hedge against rate decline. 

At the Primary Market Auction that held last week, the 91 and 182-day instruments were 0.6x and 0.3x under subscribed respectively while the 364-day instrument was 4.0x oversubscribed as more investors positioned at the longer-dated instrument. To this end, the stop rates came in lower at 11.75% (vs.11.85%), 13.00% (vs. 13.50%) and 13.19% (vs. 13.50%) for the 91, 182 and 364-day instruments respectively.

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This week, an OMO maturity of N227.5bn is expected to hit the system and we expect the CBN to continue its liquidity mop-ups via OMO auctions. Also, a Primary Market Auction is slated to hold this Wednesday with the CBN offering a total of N53.9bn.

We expect that the bullish trend will be sustained in both the primary and secondary markets as investors continue to take positions in anticipation of further rates decline.

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