N2.81tn Liquidity Expected as DMO Tests Investors’ Appetite with N800bn TBs

Nume Ekeghe

Nigeria’s money market is expected to receive N2.81 trillion in liquidity inflows this week as the Debt Management Office (DMO) offers N800 billion in Treasury bills today, with the balance between maturing securities and fresh government borrowing expected to shape liquidity conditions and yields.

The Financial Markets Dealers Association (FMDA), in its weekly market report said the N2.813 trillion in inflows this week will be driven largely by N2.408 trillion in Open Market Operations (OMO) maturities, alongside N263.58 billion in federal government bond coupons, N130.72 billion in Treasury bills maturities and N10.923 billion in corporate bond coupons.

The DMO is scheduled to offer N800 billion in Treasury bills today, comprising N100 billion each in 91-day and 182-day instruments and N600 billion in 364-day bills. Settlement is scheduled for October 29.

The FMDA report stated: “Inflows are projected at N2.813trn this week, led again by N2.408trn of OMO maturities, alongside N263.58bn of FGN Bond coupons, N130.72bn of T-bill maturities and N10.92bn of Corporate Bond coupons. 

“The DMO returns to the primary T-bill market on 28 October with an N800bn offer (N100bn 91-day, N100bn 182-day, N600bn 364-day, settling 29 October), while its next FGN Bond auction isn’t due until 16 November, leaving the NTB sale as the main scheduled drain this week, alongside any further OMO absorption.”

The expected inflows come after liquidity growth in the financial system moderated last week, as the impact of maturing securities and other inflows was partly offset by government borrowing and monetary operations.

According to the report, “System liquidity rose a modest 10.39per cent w/w last week to N6.936trn from N6.283trn, a sharp deceleration from the prior week’s 69.39per cent surge, as strong inflows, N2.067trn of OMO maturities, N392.79bn of T-bill maturities, FGN Bond coupons and a confirmed N2.43trn FAAC disbursement (full transmission not yet certain), were largely offset by two absorption operations: the 19 October FGN Bond auction, which settled N2.024trn on 21 October, and the 22 October OMO auction, which sold N2.629trn across the 138-day (17.63per cent) and 180-day (17.14 per cent) tenors.”

Despite the slowdown in liquidity growth, Treasury bills yields declined last week, with the average yield falling by 59 basis points to 17.64 per cent.

FMDA stated: “T-bills: Treasury bill yields eased broadly last week, with the average down 59bps to 17.64 per cent, led by declines at the short end, the 1-month (-198bps) and 3-month (-96bps), even as the 6-month inched up 9bps; there was no primary market auction last week.”

The one-month Treasury bills yield fell by 198 basis points to 16.85 per cent, while the three-month yield declined by 96 basis points to 16.69 per cent. In contrast, the six-month yield rose by nine basis points to 17.79 per cent.

Yields on the nine-month and 12-month instruments declined by nine and two basis points to 18.52 per cent and 18.35 per cent, respectively.

The yield movements provide a backdrop for today’s auction, as investors weigh the returns on newly issued bills against prevailing secondary-market rates and their liquidity positions.

In the bond market, average yields increased by 10 basis points to 16.53 per cent, reflecting mixed movements across maturities.

The report stated: “FGN bonds: FGN bond yields were broadly steady last week, up just 10bps on average to 16.53per cent, as a sharp rally at the 2-year (-100bps) offset selloffs at the long end, led by the 30-year (+113bps) and 15-year (+68bps).”

The two-year bond yield declined by 100 basis points to 16.50 per cent, while the 15-year and 30-year yields rose by 68 and 113 basis points to 15.18 per cent and 15.73 per cent, respectively.