Continued sale of Treasury Bills (TB) by the Central Bank of Nigeria (CBN), which is an effort to mop-up excess liquidity in the system, in addition to the expected N120 billion worth bonds auction, may raise money market rates, dealers stated during the weekend.
According to money market traders, the apex bank sold about N283 billion ($877.11 million) worth of treasury bills to mop up liquidity, jerking up interbank lending rates.
“We expect the market to open in the negative next week, given the volume of OMO bills sold, while the interbank lending rate is seen within the 18-20 percent range,” one dealer said.
Dealers at Afrinvest West Africa Limited also added their voice, stressing, “In the week ahead, we expect money market rates to trend northwards as the CBN continues to mop-up excess liquidity in the system in addition to a scheduled bonds auction of about N120.0 bn by the DMO next Wednesday.
Also, “we expect activity level at the local bonds market to be broadly driven by primary market auction by the Debt Management Office (DMO) scheduled for next Wednesday.”
The DMO is to auction between N90.0 billion – N120.0 billion of the JULY 2021, JAN 2026 and MAR 2036 bonds at the Monthly Primary Market Auction (PMA), where dealers said they expect the auction to be oversubscribed in line with recent DMO PMAs.
Other dealers from Cowry Assets Management Limited, in a note to investors stated thattheoutflowfromFGNBondauctionofN105billionwillbepartiallyoffsetbymaturingOMO-301-daybillsworthN23.684billion.
This week, the Debt Management Office will issue Federal Government bonds worth N105 billion,viz:5-year,14.50 percent FGN JUL 2021 paper worth N35billion, 10-year,12.50per cent FGN JAN 2026 bond worth N35 billion and 20 year,12.40 percent FGN MAR 2036 debt worth N35billion.
In September, the central bank sold Open Market Operations (OMO) bills to soak up about 1.2 trillion naira, in a bid to curb speculation against the currency and shore up fixed income yields to attract investors.
The bank said it will keep interest rates tight to attract foreign currency and resolve a chronic dollar shortage brought on by a slump in oil prices.