Treasury Bill Yield Slowdown as Investors Position for Auction
The average yield on Nigerian Treasury bills slows down to 5.6% on Monday as investors’ position for mid-week primary market auction where the apex bank is expected to roll over maturing bills.
The bullish tendency in the market has persisted as yield contracted 27 basis points last week as analysts spotted improvement in the financial system liquidity.
Consequent to robust liquidity position, the overnight lending rate plunged by 675 basis points to 13.8% on Monday as the average yield in the Treasury bill the second market tapered 5 basis points to 5.6%.
Analysts at Cordros Capital said across the benchmark curve, the average yield was flat at the short and mid segments but contracted at the long (-12bps) end due to demand for the 325 day to maturity (-61bps) bill.
Similar to trading results in the treasury space, the average yield at the open market operations (OMO) segment also dropped by 9 basis points to 7.7%.
Last week, liquidity level stood at N285.4 billion long as average yield across all tenors fell 27 basis points from previous to close at 5.62% from 5.90%, according to a market report from Afrinvest.
This week, the Apex bank is scheduled to roll over maturing bills worth N57.5 billion at the Primary Market Auction on Wednesday across the 91-, 182-, and 364-Day tenors.
Going into the week, Afrinvest analysts said they expect N80.0 billion and N57.5 billion worth of maturing OMO bills and NT-Bills respectively to hit the system and improve system liquidity which printed at N325.6 billion long as of Friday.
Analysts projected to witness active participation in the Nigerian Treasury Bills market as investors’ position for the mid-week auction.
Also, the Treasury bond secondary market traded mixed as the average yield stayed flat at 11.9%. Across the benchmark curve, the average yield contracted at the short (-1bp) and mid (-5bps) segments due to demand for the JAN-2022 (-4bps) and FEB-2028 (-16bps) bonds, respectively.
Conversely, the market witnessed average yield expansion at the long (+4bps) end due to the JUL-2045 (+56bps) bond sell-off.
Last week, the FGN Bond secondary market recorded a bullish run as average yield across the curve declined 13 basis points to close at 11.94% from 12.07% the previous week.
Specifically, analysts said the most buying interest was seen in the short- to medium-end of the curve as average yield shed 11 and 22 basis points week on week to close at 9.92% and 12.32% respectively.
However, the average yield at the long end of the curve marginally maintained its bullish run, shedding only 5 basis points to stop at 13.00% from 13.05% the previous week.
“We expect that activity levels to remain stable in the secondary market as investors gradually position in relatively attractive maturities in light of improved yields”, analysts said.
Read Also: T-Bill Rate Closed Flat as Analysts Predict Yields Slowdown in June
Treasury Bill Yield Slowdown as Investors Position for Auction
