Rates to remain flat as roll-over lessens impact of T-Bills maturities

Expectations are high among participants in the money market that the impact on system liquidity level, of Treasury-bills maturity totaling N135 billion will be moderated by a scheduled roll-over of the same amount.

Also, there are indications that investor appetite will remain tilted towards shorter term government securities given the high yield offering which tends to off-set current inflation risk and also inflation expectation.

Dealers at Cowry Assets Management Limited said the CBN will this week, auction treasury bills worth N120.029 billion, viz: 91-day bills worth N28.122 billion, 182-day bills worth N23.683 billion and 364-day bills worth N83.168 billion.

The outflows according to them will be offset by maturing treasury bills worth N144.027 billion, viz: 91-day bills worth N37.176 billion, 182-day bills worth N23.683 billion and 364-day bills worth N83.168 billion.

Consequently, in addition to expected Federation Account Allocation Committee (FAAC) inflows, “we anticipate a boost in liquidity with resultant moderation in interbank lending rates,” the dealers said.

According another dealer, “we expect a Treasury-bills maturity to hit the system but its impact on system liquidity level is expected to be tapered by a scheduled roll-over of the same amount. Nonetheless, we expect money market rates to hover around current levels.”

Meanwhile, the Central Bank of Nigeria on Thursday said it had sold more treasury bills than originally planned at an auction. This comes after it lured demand for one-year debt with yields above inflation.

CBN has been selling bills with yields below inflation in recent months to curb borrowing costs as it aims to fund half of this year’s forecast budget deficit of N2.36 trillion ($7.50 billion) through the domestic debt market.

Yields on the six-month bill were unchanged from the last sale at 17.2 per cent to fetch N48.5 billion, while a N39 billion bill due in three month was sold N13.6 per cent against 13.65 per cent previously.

Total demand stood at N216.38 billion against N312.44 billion at the last sale.

On Thursday, the debt office also issued more bonds than it originally planned at an auction after slowing inflation rate helped it offer debt at lower yields.

The central bank issues treasury bills twice a month to finance the government’s budget deficit and help lenders manage liquidity and curb inflation.