Analysts Foresee Slight Decline in T-Bills Stop Rates

By Modupe Gbadeyanka

On Wednesday, October 16, 2019, the Central Bank of Nigeria (CBN) will auction treasury bills worth N121.9 billion to investors via the primary market.

This debt instrument would be offered in three maturities; 91-day bills worth N5.85 billion, 182-day bills worth N3.50 billion and 364-day bills worth N112.54 billion.

Business Post reports that at the last exercise, the central bank pegged the stop rate of the three-month instrument at 11.08 percent, the six-month maturity was cleared at 11.60 percent, while the 12-month tenor was offered at 13.20 percent.

For analysts at Cowry Asset, stop rates would be slightly lowered by the apex bank at this week’s exercise, especially on the one-year tenor, which has had huge interest from market players.

In their weekly report, they said, “We expect their stop rates to decline marginally, particularly at the long end of the curve, as investors have shown sustained preference for the 364-day bills in previous auctions. We also expect NIBOR to moderate amid maturing N463.98 billion OMO-bills.”

A glance at the secondary market for T-bills last week, the average yields moderated for all maturities tracked amid sustained demand pressure.

This also extended to the primary market as yields on the one-month, 3 months, 6 months and 12 months maturities moderated to 10.90 percent from 12.42 percent, 11.91 percent from 12.37 percent, 12.37 percent from 13.20 percent and 14.13 percent from 14.75 percent respectively.

Meanwhile, CBN sold treasury bills worth N318.91 billion through Open Market Operations (OMO) to partly mop up the surplus financial system liquidity engendered by matured T-bills worth N347.19 billion.

In line with expectations, the net inflows boosted liquidity and led to moderation in NIBOR for most tenure bucket tracked. Specifically, NIBOR for one month, 3 months and 6 months tenure buckets fell to 11.85 percent from 13.77 percent, 12.89 percent from 14.05 percent and 13.50 percent from 14.40 percent respectively. However, NIBOR for overnight funds rate rose to 12.56 percent from 4.10 percent.