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T-Bills Yields Drop as Lending Rates Increase

By Dipo Olowookere

The average yields of treasury bills depreciated for the third consecutive time on Wednesday as the Central Bank of Nigeria (CBN) conducted the second Open Market Operations (OMO) auction this week after Tuesday’s sales.

A total of N137.59 billion was raised at Wednesday’s exercise as the apex bank continues its strategy to curtail liquidity levels.

Business Post reports that the exercise was largely undersubscribed with the central bank offering N400 billion worth of the debt instruments across three maturities.

Of the N100 billion worth of the 64-day bills, the apex bank received subscriptions valued at N9.80 billion, eventually selling N7.50 billion at 10 percent.

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Also, of the N100 billion worth of the 127-day bills, investors offered N10.05 billion with the bank allotting N4 billion of the bills at 11.50 percent.

It was observed that of the N200 billion worth of the 190-day paper, the CBN received offers valued at N137.09 billion, but the bank only sold N126.09 billion to market players at 12.15 percent.

At the end of the day, the treasury bills market traded bullish generally supported by buoyant system liquidity.

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According to analysts at Zedcrest Research, the bullish sentiments on T-bills are expected to remain as system liquidity levels remain high.

The central bank is also expected to maintain its stance on rates at subsequent OMO auctions, with another expected today, while the market anticipates the maturing of N294.52 billion worth of OMO bills.

At the money market, the average rate advanced by 0.09 percent to close at 3.59 percent on Wednesday.

This was as the Open Buy Back (OBB) and Overnight (OVN) rates went up respectively by 0.09 percent and 0.08 percent to 3.17 percent and 4 percent amidst buoyant system liquidity, despite another OMO auction sale by the CBN.

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The system liquidity is estimated to close yesterday at about N509.44 billion net positive as the apex bank sold a total of N137.59 billion at an OMO auction.

With inflows from OMO maturities of N294.52 billion expected today, the bank is expected to float an OMO auction for the third time week to counter the maturities, leaving the rates to remain relatively stable.

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Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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