The Central Bank of Nigeria (CBN) will today auction Treasury Bills (T-Bills) worth N130.648billion representing N20.648billion, N30billion and N80billion in 91-day, 182-day and 364-day instruments respectively.
Ahead of the T-Bills primary auction bid which holds twice in a month (every other Wednesday), market analysts at Meristem Securities Limited said that based on the level of liquidity in the system and the current favourable yield environment, “we advise the following stop rates for the respective instruments: 91-Day (N20.648billion: 12.92%); 182-Day (N30billion: 13.02%) and 364-Day (N80billion: 13.72%).
“We advise these rates with the dual purpose of achieving the best possible yield as well as ensuring the success of the bid. The above likely stop rates are our estimates and might not necessarily hold true, as the final decision always lies with the CBN based on the auction process,” the analysts noted.
“We analyze the current yield environment in light of the outcome of the previous auctions on the respective instruments. Since the last auction on the 5th
of February, yields on all the instruments listed have advanced by 0.80%, 0.49%, and 0.50% respectively (current yields; 91-day: 13.19%, 182-day: 13.37%, 364-day: 14.42%),” the analysts said.
According to them, “We have considered the current market mood as regards T-Bills instruments and we rate it favourable. This year so far has seen the average yield on T-Bills instruments marginally advance across tenors, recording a 0.08% rise YtD. Yields however declined 0.10% across tenors last week.”
They further noted that the current yield environment has witnessed an upward trend given the headwinds in the current financial landscape.
“We have expressed earlier the possible impact of QE tapering on yields in 2014. Further retrenchment of an additional $10billion after the Federal Open Market Committee (FOMC) meeting last month in our view is already having notable impact on yields. Also, the impact of CRR hike on yields cannot be under-estimated since Deposit Money Banks (DMBs) are major players in the fixed income market as we believe the increased CRR should limit their activities and consequently affect yields. OMO maturities worth N213.2billion are expected this week,” market analysts at Meristem Securities added
