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Treasury bills, inter-bank rates defy supply, demand laws
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At the 91-day treasury bill auction held in the market, a total of N5 billion worth of treasury bills were offered, but only N2.18 billion worth of bills was initially subscribed to, thus putting the subscription level at just 43 percent.
The remainder of the bills valued at N2.82 billion was however underwritten by the Money Market Dealers (MMDs).
A total of N5billion worth of matured bills were repaid into the system, resulting in nil flow from the segment of the market.
But in spite of the lull in subscription level the previous Monday, the bills were issued the same as the previous week at 8.50 percent.
The situation was better captured in the 182-day treasury bills transactions were the rates went up in spite of the low subscription level.
At the 182-day Treasury bill auction, the CBN offered a total of N40 billion worth of bill, N10 billion was initially subscribed, while N4.11 billion underwritten by MMDs which resulted in a total subscription of N14.11 billion representing 65 percent under-subscription level. A total of N14.111 billion was sold at a discount rate of 9.15 percent, a 15 basis point increase from the previous week's figure of 9.0 percent.
A total of N10 billion worth of matured bills was repaid into the system resulting in a net-outflow of N4.11 billion.
The situation was the same in the inter-bank offer rate (NIBOR) market as the January allocation paid into the system by the Federal Allocation Account Committee (FAAC) was unable to douse increasing inter-bank rates as tightness persisted in the money market.
A total outflow of N65.78 billion left the system through the government securities market and the foreign exchange market. The net outflow from the system was N50.78 billion.
The inter-bank market transaction shows that the 7-day NIBOR inched up through the week to close the week at 11.00 percent, a 100 basis point increase from the previous week's figure of 10.00 percent.
The 90-day NIBOR also inched up through the week closing at 13.85 percent, a 42 basis point increase from the previous week's figure of 13.43 percent.
At the secondary segment of the government securities market, total bids received in the two-way quote trading system amounted to N26billion with tenor days ranging from 114 to 345 days; all the bids were allotted and sold.
A 7-day reverse- repo worth N17.5 billion was also allotted and sold at a discount rate of 5.95 percent. This brought the total allotment in the secondary market to N43.5 billion. The bills were issued at discount rates ranging between 8.65 percent and 9.25 percent up from the previous week's range of 8.65 percent and 9.10 percent.
At the foreign exchange auction held on Monday, the total amount offered was $60million while a total of $17.2million was sold. At the second auction on Wednesday 30 January 2008 January, 2007, the amount offered was $60 million while $10 million was sold.
The amount of foreign exchange sold during the week was 22.7 percent of the amount offered. This is an indication that the amount demanded was lower than the amount offered.
The value of the naira remained stable at the official and parallel market but depreciated at the inter-bank market. In the official and parallel markets, the value of the naira remained stable at N116.81/$1 and N120.30/$1 respectively, same as the previous week's figure.
In the inter-bank market, the value of the naira depreciated by N12 kobo to close the week at N117.77/$1 from the previous week's figure of N117.65/$1.
We expect a marginal appreciation in the value of naira at the official market as the CBN is poised to meet all genuine demand.
The remainder of the bills valued at N2.82 billion was however underwritten by the Money Market Dealers (MMDs).
A total of N5billion worth of matured bills were repaid into the system, resulting in nil flow from the segment of the market.
But in spite of the lull in subscription level the previous Monday, the bills were issued the same as the previous week at 8.50 percent.
The situation was better captured in the 182-day treasury bills transactions were the rates went up in spite of the low subscription level.
At the 182-day Treasury bill auction, the CBN offered a total of N40 billion worth of bill, N10 billion was initially subscribed, while N4.11 billion underwritten by MMDs which resulted in a total subscription of N14.11 billion representing 65 percent under-subscription level. A total of N14.111 billion was sold at a discount rate of 9.15 percent, a 15 basis point increase from the previous week's figure of 9.0 percent.
A total of N10 billion worth of matured bills was repaid into the system resulting in a net-outflow of N4.11 billion.
The situation was the same in the inter-bank offer rate (NIBOR) market as the January allocation paid into the system by the Federal Allocation Account Committee (FAAC) was unable to douse increasing inter-bank rates as tightness persisted in the money market.
A total outflow of N65.78 billion left the system through the government securities market and the foreign exchange market. The net outflow from the system was N50.78 billion.
The inter-bank market transaction shows that the 7-day NIBOR inched up through the week to close the week at 11.00 percent, a 100 basis point increase from the previous week's figure of 10.00 percent.
The 90-day NIBOR also inched up through the week closing at 13.85 percent, a 42 basis point increase from the previous week's figure of 13.43 percent.
At the secondary segment of the government securities market, total bids received in the two-way quote trading system amounted to N26billion with tenor days ranging from 114 to 345 days; all the bids were allotted and sold.
A 7-day reverse- repo worth N17.5 billion was also allotted and sold at a discount rate of 5.95 percent. This brought the total allotment in the secondary market to N43.5 billion. The bills were issued at discount rates ranging between 8.65 percent and 9.25 percent up from the previous week's range of 8.65 percent and 9.10 percent.
At the foreign exchange auction held on Monday, the total amount offered was $60million while a total of $17.2million was sold. At the second auction on Wednesday 30 January 2008 January, 2007, the amount offered was $60 million while $10 million was sold.
The amount of foreign exchange sold during the week was 22.7 percent of the amount offered. This is an indication that the amount demanded was lower than the amount offered.
The value of the naira remained stable at the official and parallel market but depreciated at the inter-bank market. In the official and parallel markets, the value of the naira remained stable at N116.81/$1 and N120.30/$1 respectively, same as the previous week's figure.
In the inter-bank market, the value of the naira depreciated by N12 kobo to close the week at N117.77/$1 from the previous week's figure of N117.65/$1.
We expect a marginal appreciation in the value of naira at the official market as the CBN is poised to meet all genuine demand.
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