A total of N284.14 billion matured treasury bills are expected to hit the financial market on Thursday.
The maturing bills would enter the financial system via the Primary Market Auction (PMA) and Open Market Operations (OMO).
The maturing bills which would consist of 91-day bills worth N20.16 billion; 132-day bills worth N91.73 billion; 182-day bills worth N50.40 billion and 364-day bills worth N85.85 billion, would further strengthen the liquidity position of the market.
The financial system recorded strong inflow of funds last week as a combination of redeemed Series 1 Asset Management Corporation of Nigeria (AMCON) bonds worth N1 trillion and matured treasury bills helped boost system liquidity.
AMCON had given holders of the fixed income instrument the option to decide if they wanted to be paid in cash or treasury bills. The move was to make sure that the exercise does not distort the financial system, by ushering excess liquidity in the market.
The AMCON bonds are held between the central bank and other institutional investors such as Pension Fund Administrators (PFAs), insurance companies and asset managers and banks. But at the end of the exercise, the central bank would be the only creditor to AMCON.
In addition, last week, a total of N77 billion was injected into the system via matured treasury bills consisting of 69-day bills worth N26.76 billion; and 171-day bills worth N50.23 billon.
This led to a reduction in the various tenors of the Nigerian Interbank Offered Rates (NIBOR). For instance, data gathered from the FMDQ showed that while the Overnight (Call) tenor reduced to 10.58 per cent last Friday, from 10.79 per cent the preceding Friday, the 7-day dropped to 10.83 per cent, from the 11.08 per cent it attained the preceding Friday.
Similarly, just as the 30-day tenor fell to 11.08 per cent, from 11.33 per cent, the 60-day tenor slipped to 11.33 per cent last Friday, from 11.58 per cent the preceding Friday.
However, it was gathered that the central bank issued a 136-day treasury bills worth N70 billion last week Monday in a bid to absorb the excess liquidity in the system.
“We expect interest rates to moderate further at the interbank market amid boost in system liquidity,” analysts at Cowry Asset Management Limited predicted.
Just like the preceding week, transactions at the Secondary market arm of the bond market remained was low last Friday as settlement challenges occasioned by changes being implemented on the RTGS system by the central bank persisted.
This led to stability in bond prices (and their respective yields) on a week-on-week basis for all maturities tracked.
“This week, we expect the Over-the-Counter market to fully resume trading activities as the RTGS hitches are expected to be resolved and investors return to the market after the yuletide celebration. Hence, we presage an increase in bond prices on the back of the buy pressure amid boost in liquidity,” Cowry Asset Management further forecast.