29 September 2014, Abuja – The Central Bank of Nigeria (CBN) sold treasury bills valued at N114.39 billion with maturities ranging between three months and one year, as at last week.
A breakdown of the amount of the instrument auctioned showed that the central bank sold N21.53 billion worth of three-month paper at 9.95 per cent, higher than 9.58 per cent at a previous auction on September 17.
It also sold N33.78 billion in 6-month notes at 10.10 per cent, 13 basis points lower than the previous auction.
In addition, the central bank raised N59.08 billion in one-year debt at 10.35 per cent, the same yield the paper fetched the last time it was sold on September 3.
Total demand for the fixed income instrument was put at N181.44 billion at the auction, compared with N122 billion for the 3-month and 6-month paper sold at the Sept 17, auction.
Meanwhile, the interbank money market commenced the week highly liquid as rates declined across various money market instruments.
This was reflected in the Call and Open Buy Back (OBB) rates that closed at 10.8 per cent and 10.4 per cent.
This was largely attributed to the injection of N293 billion Federation Account Allocation Committee (FAAC) funds which hit the system during the week.
Subsequently, the CBN was said to have mopped up N130 billion via open market operations (OMO).
In addition, the CBN mopped up N70.3 billion on last Thursday after repaying OMO debt worth N144.4bn the same day.
Nonetheless, week-on-week, Call and OBB rates were flat 10.8 per cent and 10.5 per cent.
“We expect maturing OMO bills worth N258.8bn to hit the system, while the Debt Management Office Sept 2014 bond will mature on the 28th.
“We anticipate that the CBN will intervene via OMO mop-ups to keep liquidity in check. Hence, we expect rate to stay flat,” analysts at Afrinvest Securities Limited predicted.
The CBN increased its dollar supply at its regulated Retail Dutch Auction System (RDAS) last week by $50 million to $700 million, in an attempt ease the pressure on the naira which has lost approximately N1 at the interbank this month.
It also offered $350 million apiece on Monday and Wednesday, which were fully subscribed at the marginal rate of N155.75 to a dollar.
But week-on-week, the naira shed 65 kobo and 50 kobo to close at N163.95 to a dollar and N169.00 to a dollar at the interbank and BDC segments respectively.
“We anticipate the naira will be driven by sustained supply of the green back and moderated by dollar supplies by oil majors,” Afrinvest Securities predicted.
Also, analysts at Cowry Asset Management Limited anticipates further strengthening of the naira at the official window on the back of sustained dollar supply from oil majors particularly for month-end obligations.
The bond market witnessed selloffs last week by offshore portfolio investors as rates rose across most tenors.
Majority of the selloffs in the bond market during the week was experienced in the mid-term instruments with a 20 basis points increase in yields while rates in the longer term notes were broadly flat.
Yield on the 9.25 per cent FGN SEP 2014 paper however declined to 0.9 per cent as it approaches maturity.
Whilst the Federal Reserve ambiguity regarding timeline for interest rate hike has continued to force capital reversals in emerging market economies, analysts further pointed out that deteriorating macroeconomic fundamentals as exhibited by the falling oil prices and the naira volatility at the interbank market has further worsened investor confidence in the capital market.
Hence, they anticipated further pessimism in the bond market.
– This Day