The Nigerian Treasury bill (NTB) rate closed flat on Tuesday as liquidity in the financial system improves further amidst prediction that upward yields repricing will slowdown in June.
In general, fixed income market traded quiet, railing the trend of Monday, said analysts at Chapel Hill Denham despite improvement recorded in liquidity position in the financial system.
Particularly, in the treasury bill space, investors’ were noted to have maintained the status quo on the bid and offer sides amidst renewed cautious trading after monetary policy authority held key rates.
Liquidity in the money market which closed at a surplus of N256.2 billion on Monday, further improved on Tuesday as market participant increased funding in the Standing Deposit Facility (SDF) window.
As such, there was a reduced demand by deposit money banks (DMBs) in the Standing Lending Facility (SLF) window. Consequently, the open buy back and the overnight rates declined by 50 basis points (bps) and 33bps to close the day at 12.00% and 12.67% respectively.
In the month of May, the overnight and open buy back rates opened at 27.75% and 27.50% respectively to close at 13.00% and 12.50%, following the Open Market Operation (OMO) maturity inflow of ₦85 billion within the month.
Treasury bill benchmark curve was flattish, closed the day at 5.78%.
“We saw some activities on the long-end of the open market operations (OMO) benchmark curve which resulted in an expansion of 5bps to close at 9.03%”, Chapel Hill Denham said.
The investment firm added that this was triggered by the re-investment of the N55.5 billion OMO maturity. However, there were bearish sentiments in the secondary bond market particularly in the extreme long-end of the curve – the Apr-2049 and Mar-2050.
This partly indicates investors wanting to exit the long end of the curve in a bid to reinvest in other attractive maturities. Overall, the bond benchmark curve contracted by 3bps to 13.25% on Tuesday.
“We expect improved liquidity to drive more activities in the long end of the OMO curve, especially as investors await the release of new NTB calendar”, analysts said.
On the fixed income market outlook, investment analysts at Atlass Portfolio Limited said as the inflation rate began to take a decline, they expect the yields in the fixed income space will slow down in the month of June.
Meanwhile, for the second time this week, the Investors and Exporters window closed flat at N412.00 on Tuesday. However, the parallel market exchange rate depreciated by 0.6% on Tuesday as demand builds up in reaction to low activities in the Investors and Exporters space.