Treasury bill yields Decline Further on Excessive System Liquidity


Thursday, April 5, 2018 /5:30 AM/Zedcrest Capital

***MPC retains lending rate at 14%***

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The bond market remained slightly bullish in today’s session compressing by c.7bps on average, in a continued recovery from the bearishness of the previous week. Traded volumes however remained relatively thin with the bullish trend mostly hinged on price action by traders and a change in broader sentiment to a slightly bullish posture. We expect the market to remain relatively stable in the near term, as there are no significant changes to the near term outlook for rates, following the CBN’s decision to hold its benchmark rate at 14%. This is however barring a significant twist in OMO issuance (volume/rates) by the CBN.



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Treasury Bills

The T-bills market remained largely bullish, with yields compressing further by c.27bps on average. This was as the system was awash with liquidity currently estimated at c.N680bn long, coupled with  expectations of c.N420bn from OMO and Net PMA repayments tomorrow. We expect the market to be significantly bullish on the backdrop of the aforementioned factors, even as we expect more spill over demand from market players looking to cover for some lost auction bids on the 1-yr bill at today’s PMA. Our strong bullish expectations should however be moderated by a much anticipated OMO auction from the CBN. 


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Money Market

The OBB and OVN rates declined to 2.67% and 3.33% respectively, its lowest level  recorded since on the 14th of December 2017, when system liquidity was as high as N815bn. System liquidity is currently estimated at c.N680bn and could trend as high as N1.1trn, unless there is a significant OMO intervention or Stab sec sale by the CBN. We expect rates to be relatively stable tomorrow, as there are no significant funding pressures in the system.


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FX Market

The Interbank rate appreciated slightly by 0.02% to N305.60/$ from its previous rate of N305.65/$, with the CBN’s FX reserves recorded to have improved by 1.51% to $46.26bn. The NAFEX rate also appreciated slightly by 0.02% to N360.15/$, with total volume traded declining by 40% to $170m. Rates in the Unofficial market also appreciated by 0.06% to N361.00/$.


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The NGERIA Sovereigns remained slightly bullish in today’s session, with yields compressing further by c.4bps on average. Investors were mostly bullish on the 2047s which gained +0.57pt and was last traded at 104.54.


The Nigerian banks remained relatively weak, with only few trades across. Investors remained slightly bearish on the FIDBAN 22s, last traded on the bid at 102.93. We witnessed a fair amount of demand on the SEPLLN 23s, with best bids seen at around 99.875, some however willing to pay at par which was last traded level.

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