Rates to rise on N94bn worth treasury bills auction

Money market rates are expected to rise this week as the Central Bank of Nigeria (CBN) auctions N94 billion worth of treasury bills even though there is going to be a treasury-bills maturity of N44 billion scheduled to hit the system.

Dealers from an Investment Banking and Research Company, Afrinvest (West) Africa Limited, said the auction will reduce effect of the auction on system liquidity.

“In the week ahead, we expect money market rates to rise as the apex bank is scheduled to auction N94 billion worth of treasury bills. There is also a T-bills maturity of N44 billion scheduled to hit the system next week but the T-bills auction will taper its effect on system liquidity,” the company stated in a note to investors.

The bank said the country will raise N94 billion ($330 million) in short-dated Treasury bills with three-month to one-year maturities on July 6. It will raise N19 billion of the three-month debt, N25 billion of the six-month and N50 billion of the one-year.

Meanwhile, during the month of June, activities in the bonds market were mixed but largely bearish. The Federal Government through the Debt Management Office (DMO) borrowed a total of N112 billion via the sale of N22 billion, N40 billion and N50 billion of the FEB2020, JAN2026 and MAR2036 bonds respectively.

Average marginal rate at the auction cleared at 14.5 per cent, 90 basis points (bps) higher than the average rate at the May auction as investors priced in macroeconomic realities into their valuation of the offered instruments.

The Nigerian Sovereign Eurobonds also saw renewed buying interest as the announcement of FX market reforms stoked positive investor sentiment in the Nigerian Sovereign Eurobond instruments. By the second week in June, the Nigerian sovereign bonds year-to-date (YTD) return had outperformed all the other sovereign bonds instruments in the sub-Saharan African region. However, the decision by Fitch Ratings to downgrade Nigeria’s credit rating to B+ triggered a sell sentiment across the Nigerian sovereign bonds instruments. The bearish sentiment however lasted for a week as the impact of the FX reforms continued to strengthen investor sentiment.