T-Bills Rates to Remain High on Liquidity Squeeze

**As Investors Snub Short, Mid-Term T-Bills for Long-Dated Notes

By Dipo Olowookere

The Central Bank of Nigeria (CBN) on Monday floated another Open Market Operations (OMO), where it offered N25 billion worth of the debt instrument.

However, it was observed that market players stayed away from the short and mid maturities, preferring to go for the long tenor papers.

Of the N5 billion worth of the 94-day bill, the CBN allotted N2.41 billion. The apex bank auctioned N10 billion each of the 178-day bill and 360-day bill, but allotted N1.08 billion and N34.78 billion respectively. The rates were retained at the previous levels.

Generally, the T-bills market turned slightly bearish yesterday as market players reacted to the liquidity squeeze from the OMO and wholesale FX sale by the central bank.

Yields consequently trended higher by 0.05 percent, following slight selloff on the short end of the curve.

“We expect the T-bill rates to remain elevated due to the liquidity squeeze in the money market, whilst a further OMO auction by the CBN will likely force rates higher,” analysts at Zedcrest Research said.

Meanwhile, rates in the money market spiked significantly as system liquidity which opened the session in negative territory of N127 billion negative was further aggravated by the OMO of N37 billion and Wholesale FX sales of $210 million by the CBN.

The OBB and OVN rates consequently ended the session at an YTD high of 43.33 percent and 47.50 percent respectively, as banks were not able to access the CBN’s SLF to fund their deficits.

The rates are expected to trend lower on Tuesday as banks would be able to access the CBN’s SLF window to fund their obligations at cheaper rates.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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