T-Bills Market Closes Bearish as CBN Relaxes OMO Sale

By Dipo Olowookere

The treasury bills market ended the week on a bearish note yesterday in the absence of any OMO auction by the Central Bank of Nigeria (CBN).

For some weeks now, the apex bank had embarked on an aggressive sale of treasury bills at the secondary market to soak excess liquidity from the financial system.

At the market on Friday, a tighter system liquidity pressured yields on the NTB curve, with yields rising higher by 0.09 percent on the average across the NTB curve.

According to Zedcrest Research, in the coming week, the CBN will likely resume its daily OMO auction offering to manage expected inflows from FAAC payments and OMO maturities.

Due to the holidays and reduced trading sessions, the central bank is expected to be aggressive in the volumes on offer as it keeps a tight lid on system liquidity.

Meanwhile, money market rates jumped higher by 9 percent as system liquidity tightened further on the back of outflows for the FX retail intervention by the CBN and bond auction settlement.

Open Buy-Back (OBB) and overnight (O/N) increased to 21.67 percent 13.58 percent and 25.08 percent from 14.83 percent, with system liquidity estimated to close in a negative territory of N110 billion.

The rates are expected to open significantly higher in the coming week, as market participants provide funding for FX Wholesale interventions by the CBN.

High funding rates should be short-lived due to inflows from November FAAC payments as well as OMO maturities of N.588.89 billion expected later in the week.

The CBN is also expected to aggressively mop up the excess liquidity, resuming its daily OMO auction offerings.