Nigeria’s financial market would be awash with liquidity as maturing Open Market Operation (OMO) bills worth N418.9 billion will hit the system this week.
The system liquidity stood at N295.5 billion as at Friday. Analysts at Afrinvest Securities Limited do not anticipate an improvement in demand as investors continue to seek alternatives from the current suppressed Nigerian Treasury Bills (NT-Bills) secondary market yields.
“we maintain our advice that investors remain on the lookout for possibly higher yielding instruments from corporates,” the analysts said.
A report by Afrinvest noted that last week, the weak investors’ sentiment previously recorded in the NT-Bills secondary market was sustained given the depressed yield environment. Despite the buoyant system liquidity (N240.3bn long as at Monday), the week started out on a quiet note and was maintained throughout with minimal trading activities witnessed on the longer end of the curve.
Consequently, average yields contracted marginally by 1bp Week-on-week to remain at 0.1%. Particularly, slight buying interest was recorded on the long-dated maturities such as 30-Sep-21, 14-Oct-21 and 28-Oct-21 which declined 6bps, 5bps and 3bps W-o-W respectively.
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At the Primary Market Auction (PMA) on Wednesday last week, the CBN offered a total of N150.6bn worth of NT-Bills across the 91-, 182- and 364-day tenors. The offer maintained a significant level of demand as it recorded a total bid-to-cover ratio of 2.9x (N150.6bn offered against N445.9bn total subscribed). All tenors were oversubscribed with investor demand strongest at the 364-day instrument which was oversubscribed by 3.0x.
At the bond market, the Debt Management Office (DMO) is scheduled to auction the 2- and 3-year tenor FGN savings bond for the month of December 2020.
Analysts expect yields to remain pressured as liquidity levels remain elevated. “We therefore advice investors to take position on the relatively more attractive maturities along the curve while looking out for possible corporate offerings, the analysts said.
According to the report, the performance in the FGN bond secondary market last week was bullish, as investors continue to seek alternatives from the unimpressive yields in the NT-Bills market. As a result, average yield across all tenors shed 12bps W-o-W to settle at 3.8% from 4.0% the previous week. Particularly, the JAN-2022 and JUL-2030 maturities witnessed the most buying interest, contracting -83bps and -55bps W-o-W respectively.
At the foreign exchange market on Tuesday, Naira weakened by 0.96 percent as the dollar was quoted at N394.00 as against the last close of N390.25k on Monday at the Investors and Exporters (I&E) forex window.
Analysts at FSDH research said most participants maintained bids between N384.00 and N399.87 per dollar.
On Monday, the CBN released another two circulars revising operational guidelines for various market segments. Through these circulars, the CBN is expected to improve the retail FX market’s liquidity by encouraging more FX inflows into Nigeria through diaspora remittances to bring down the rates in the parallel market with the anticipated supply.
