Rates to trend high on tightening stance, N135.7bn worth T-bills auction

There are expectations that money market rates may  trend higher this week over Central Bank of Nigeria’s (CBN’s) continued mop up of excess liquidity and a Treasury Bills auction of N135.7 billion on Wednesday.

However, while some dealers are expectant of the above auction, and corresponding maturities, others rely on the central bank›s notice on Friday that  Nigeria plans to raise N129.67 billion ($403.01 million) in short-dated treasury bills at the Wednesday auction.

The bank said it would raise N28 billion in three-month paper, N33.49 billion in six-month bills and N68.18 billion in one-year bills.

Payment for the purchases will be made on Thursday, the bank said in a public notice.

“In the week ahead, we expect money market rates to trend northwards as the CBN maintains its tightening stance by mopping up excess liquidity. There is also a T-bills auction of N135.7 billion next (this) Wednesday, but its impact on liquidity levels is expected to be neutralized by maturity of the same amount,” one dealer said.

Nigeria issues treasury bills to raise cash to fund the budget deficit, manage banking system liquidity and curb rising inflation.

Meanwhile, dealers are expectant that yields in the local bonds market will inch higher in the week ahead as investors continue to price in expectation of tighter monetary policy against the backdrop of weaker exchange rate and likely pass-through on prices.

“We also expect investors to concentrate more on the shorter end of the yield curve on the back of scheduled T-bills auction,” analysts at Afrinvest stated in a note to investors.