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Vanguard, MONDAY, MARCH 18, 2019 — 21


Decline in TB rates to persist as foreign investors trigger 575%


Continues from Page 19

January 16.

The above trend is

driven by massive

oversubscription (excess

demand) for TBs fuelled

by foreign portfolio

investors seeking to take

advantage of the high

interest rate regime in the

nation’s fixed income


This is reflected by the

88 percent increase in

dollar injection by foreign

portfolio investors

through the Investors

and Exporters (I&E)

foreign exchange

window, which rose

to $3.07 billion in the first

two months of the year

(January and February)

from $1.63 billion in


This massive inflow

triggered 532 percent

oversubscription in the

primary market TBs

auction held by the CBN

on February 27. The CBN

offered and sold N115

billion worth of TBs while

total subscription stood at

N727.35 billion.

This trend was repeated

last week, with the

primary market auction

recording 575 percent

oversubscription. While

the CBN offered and sold

N89 billion worth of bills,

total subscription

(investors demand) stood

at N600.52 billion.

Confirming this

development, analysts at

Lagos based Cowry Asset

Management Limited

said: “Amid demand

pressure from the foreign

portfolio investors, we

saw stop rates fall across

tenor days: 91-day, 182-

day and 364-day


They projected that the

huge demand for TBs will

persist this week when

the CBN offers maturing

TBs worth 48.6 billion, as

well as further

moderation in stop rates.

“In the new week, CBN

will rollover T-bills worth

N48.57 billion, viz: 91-

day bills worth N3 billion,

182-day bills worth N8.39

billion and 364-day bills

worth N37.18 billion. We

expect their stop rates to

fall amid buy pressure.

Amid the N169.44 billion

bills maturing, we expect

yields to further moderate

given the declining stop


In a bid to mop up the

excess liquidity from the

unmet demand for TBs in

the primary market

auction, the CBN on

Thursday held secondary

market (Open Market

Operations, OMO) TB

auction, which recorded

23 percent

oversubscription. Total

public subscription to the

N350 billion worth of bills

offered by the apex bank

stood at N429.5 billion

while the apex bank sold


N400.48 billion.

In response, cost of

funds rose marginally at

the end of the week with

average short term rates

rising by 1.8 basis points


Data from FMDQ

showed that interest rate

on Collateralised (Open

Buy Back, OBB) lending

rose by 2.0 bpts to 11.17

percent last week from

9.17 percent the previous

week. Similarly, interest

rate on Overnight

lending rose by 1.6 bpts

to 11.67 percent last week

from 10.08 percent the

previous week.

This trend may persist

this week in the face of

further liquidity mop by

the CBN in response to

maturing OMO bills

worth N169 billion during

the week.

External reserves hit

5weeks high at $43bn

The naira appreciated

further last week in the

I&E window as

the nation’s external

reserves rose to five

weeks high of $43 billion

on Thursday.

According to the CBN

the external reserves

recorded a weekly

increase of $381 million

last week to $42.987

billion from $42.606

billion on Thursday

March 7.

The $42.987 billion

recorded last week,

March 14 represents the

highest level since

February 6 when the

reserves peaked at

$42.991 billion. The rise

in reserves may be

unconnected to the huge

dollar inflow from foreign

investors through the I&E

window since the

beginning of the year.

Last week, the volume

of dollars traded in the

I&E window dropped by

58 percent to $1.7 billion

from $4.1 billion the

previous week.

However, the naira

sustained its upward

trend in the market since

last month. According to

FMDQ, the indicative

exchange rate dropped

further to N360.18 per

dollar last week from

N360.42 per dollar the

previous week,

translating to 24 kobo

appreciation for the




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