Investors Awaits Maturing N425bn Treasury Bills


By Obinna Chima 

Treasury bills worth N424.87 billion are expected to mature via theprimary and secondary markets this week.

The maturing treasury bills are expected to  offset the fixed income instrument worth N180.86 billion to be rolled over by Central Bank of Nigeria (CBN) via the primary market.

Analysts at Cowry Asset Management Limited disclosed this in their weekly review of the financial market.

In all, the central bank is expected to roll over 91-day bills worth N6.22 billion, 182-day bills worth N50 billion and 364-day bills worth N124.64 billion.


However, last week, the CBN auctioned treasury bills worth N232.63 billion via open market operations (OMO). The outflowduring the week was partly offset by a N216.04 billion in maturedtreasury bills.

Also, Standing Deposit Facility (SDF) worth N736.52 billion outweighed Standing Lending Facility (SLF) worth N297.32 billion by 247.72 per cent, which indicated surplus liquidity in the market.

Consequently, the Nigerian Interbank Offered Rates (NIBOR)moderated for most tenor buckets amid renewed financial system liquidity ease.

For instance, NIBOR for one-month, three-month and six-month tenors fell week-on-week to 13.54 per cent (from 13.56%), 13.95 per cent (from 15.08%) and 14.84 per cent (from 17.09%) respectively.

But, the NIBOR for overnight tenor bucket rose to 5.71 per centfrom 3.5 per cent.

On the other hand, the Nigerian Interbank Treasury Bills True Yield (NITTY) rose for all maturities tracked amid renewed bearish activity.

That is, yields on the one-month, 3 month, 6month and 12month maturities rose to 12.35 per cent (from 10.25%), 12.64 per cent(from 11.54%), 12.90 per cent (from 12.29%) and 13.32 per cent(from 12.99%) respectively.

“Hence, we expect renewed liquidity strain with resultant spike in interbank rates,” Cowry Asset Management stated.





Bond Market

Meanwhile, in the bond market, the bullish performance observed in the preceding week was reversed last week as average yield across tenors rose on three of the five trading sessions, up 17 basis points week-on-week.

According to Afrinvest Securities Limited, the week opened on a negative note with average yield trending 10 basis points (bps)higher to 13 per cent, from 12.9 per cent in the preceding weekfollowing sell offs on short and longer tenored instruments.

However, on Tuesday, average yield inched one basis point lower,but trended northwards by midweek, up by five basis points to 13.1per cent. However, on Thursday, average yield across tenors marginally declined by one basis point before increasing by four basis points to settle at 13.1 per cent last Friday.

The investment firm predicted that this week, average yield wouldtrend lower as investors’ appetite for longer tenored instruments remains upbeat.
Similarly, performance of the Sub-Saharan Africa Sovereign Eurobonds was largely bearish as sell offs from the precedingweek, stoked by the strengthening dollar and higher treasury billsyields, were sustained during the week.

In light of this, yield on 24 of 29 instruments rose week-on-week.

For instance, the Ivory Coast 2032, South Africa 2019, 2020, 2022and 2041 instruments recorded the most buy interest in the week.

On the flipside, average yield across the Nigerian, Ghanaian, Gabonese, Kenyan, Zambian and Senegalese instruments grew 30basis points, 10 basis points, 11 basis points, 10 basis points, 20 basis points and 10 basis points week-on-week respectively.

All instruments save for the Ghana 2022 (+0.4%) currently have a negative year-to-date (YTD) price return while Zambia 2024 (-19.2%) is currently the worst performing.
Also, the bearish performance of Nigerian corporate Eurobonds was sustained into the third consecutive week as yield on eight out of 11 instruments rose week-on-week.

The instrument with the most buying interest was Ecobank 2021 (down 15 basis points to 9.3%) while Zenith 2019 (up 75 basis points to 5.4%) recorded the most sell-offs. However, the instruments with the best YTD price return were Diamond 2019 and FBN 2021, as they were up 4.6 per cent and 3.4 per centrespectively. 


Forex Market

The central bank sustained its weekly intervention in the forex market last week. But it intervened with a slightly lower amount – US$155 million (relative to US$210 million in  previous weeks), viaits wholesale Secondary Market Intervention Sales (SMIS) window.

The move was to maintain stability and liquidity across the market.

As a result of this, the naira traded around tight bands across all segments.
The CBN spot rate remained relatively flat during the week, opening the week at N306/US$1
 and appreciating by five kobo to N305.95/US$1 by midweek. It remained unchanged at this rate tillFriday, indicating a five kobo appreciation week-on-week.

Similarly, in the parallel markets, marginal movements were recorded as the naira opened the week at N363/US$1 before strengthening by N1 to N362/US$1 by the close of the week.
At the Investors & Exporters (I&E) 
forex window, the NAFEX rate appreciated 26 kobo to N361.15/US$1 at the start of the week. However, the naira depreciated by 10 kobo by midweek to N361.25/US$1. But it appreciated to N361.01/US$1 by the end of the week, indicating a 40 kobo appreciation week-on-week.

Furthermore, activity level in the window softened as weekly turnover fell 15.7 per cent to US$1.2 billion, from the US$1.4 billion recorded the prior week.
In the FMDQ OTC futures market, the total value of open contracts of the 
naira settled OTC futures increased by US$575.4 million(14.6% expansion) to US$4.5 billion, relative to the US$3.9 billion recorded the preceding week.

The most subscribed instrument was the NOV-2018 with a total market value of US$676.1 million (contract price: N362.57) while the APR-2019 instrument was the least subscribed with a total market value of US$72.3 million (contract price: N363.32).
“In the coming week, we expect the naira to trade at similar levels on the back of the CBN’s sustained intervention in the foreign exchange market,” Afrinvest analysts stated.



Bilateral Currency Deal

Following the $2.5 billion bilateral currency swap agreement signed last month between the Central Bank of Nigeria (CBN) and the People’s Bank of China (PBoC), the CBN last weekannounced plans to start bi-weekly auctions of the Chinese yuan. The Bilateral Currency Swap Agreement (BCSA) is for a maximum of 15 billion Yuan or N720 billion with a three-year tenor.

For an authorised bank to access the bi-weekly auction of the Chinese currency, the CBN stated in the circular that such dealers “shall open Renminbi accounts with a correspondent bank and advise the CBN with its Renminbi account details which may either be with a bank onshore or offshore China”.

It also directed importers intending to import from China to obtain proforma invoices denominated in Renminbi as part of the documents required for the registration of ‘Form M’.

The CBN said in the circular that forex purchased in the window would not be used for payments on transactions in which the beneficiaries are not in China, adding that authorised dealers shall not open domiciliary accounts dominated in Renminbi for customers.

“For the purpose of this regulation, authorised dealers shall be deposit money banks and merchant banks.

“The CBN may conduct bi-weekly Renminbi bidding sessions. The Renminbi sales shall be applicable only to trade-backed transactions.

“Importers and exporters shall continue to pay the applicable levies on imports and exports respectively.”


Banks’ Borrowing from CBN

Commercial and merchant banks in the country visited the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) window, a window for banks to borrow from the CBN more frequently in 2017, compared with the previous year, due to the tight monetary policy stance of the Bank, a report has shown.

The CBN disclosed this in its 2017 annual activity report by its Financial Market Department, posted on its website at the weekend. The situation may not have been different since the beginning of the year, as the central bank has maintained its tight monetary policy stance. The report stated that the merchant and Deposit Money Banks (DMBs) requested the standing facilities to square-up their positions.

According to the report, the average daily request for SLF was N216.34 billion in 246 days, out of which Intra-day Lending Facility (ILF) conversion was N130.63 billion, amounting to 60.38 per cent of the total request.

The average daily interest charged was N159.96 million. But in 2016, the average daily request for SLF was N130.47 billionin 207 days, out of which ILF conversion was N84.62 billion, while average daily interest income was N94.76 million.