T-Bills Yields Drop 0.20% as Cost of Funds Sheds 0.09%

By Dipo Olowookere

The treasury bills market closed bullish on Friday with the rates recording a marginal decline of 0.20 percent.

It was observed that the yields moderated as a result of the buoyant level of liquidity in the system on the back of the OMO maturities and retail forex refunds in the previous session.

According to analysts at Zedcrest Research, market players however constrained demand to the shorter end of the curve, with only few real money client orders seen on the mid tenor bills (Feb and Mar), which were bought down to the last PMA levels, 12.30 percent, and no further.

Barring an OMO auction by the Central Bank of Nigeria (CBN) on Monday, the yields are anticipated to still moderate slightly, due to the significant inflows anticipated from FAAC payments to state and local governments.

“We however expect most market players to adopt a wait-and-see approach, while those with pressure to invest are expected to still maintain the short end play for now,” Zedcrest Research said.

Meanwhile, Business Post reports that the average cost of funds slightly declined yesterday by 0.09 percent to settle at 6.4 percent.

While the Open Buy Back (OBB) rate dropped to 6 percent from 10.67 percent, the Overnight (OVN) rate fell to 6.83 percent from 11.67 percent.

This came on the backdrop of the significant increase in net system liquidity from the previous session, with opening figures published at N780 billion from N105 billion previously.

This is however estimated to have declined to N430 billion as the close of business on Friday due to estimated outflows for retail forex funding by banks.

Due to expected inflows from FAAC payment, about N714 billion, the rates are expected to decline further on Monday, barring a significant liquidity management action by the CBN.