Bonds, Treasury Bills Yields Rise as Naira Depreciates
Following a robust subscription at the Central Bank primary auction last week, the federal government bonds and Nigerian T-Bills see expansion in yields on Monday as naira depreciates at Investors’ window.
On Friday, the average yield on Treasury Bills closed at 4.67%, a 95 basis point drop from 5.62% following a record-breaking bearish week which saw yield persistently dropping as inflation worries drop low.
At the last auction was more than 7 times over-subscribed, spot rate on 364-billion tumbles while 91-day and 182-day instrument attracted 2.5% and 3.50% respectively.
The higher subscription was driven basically because of improvement recorded in the financial liquidity system as Investors seek investment windows to maximize returns amidst scarce issuance of Open Market Operations Bills.
At the primary market auction last week, the Central Bank offered a total of N51.5 billion across the 91-Day (N8.4 billion), 182-Day (N16.0 billion), and 364-Day (N27.0 billion) which was met with mixed demand.
Afrinvest said the short- and mid-tenured bills were undersubscribed while the longest dated bill witnessed an oversubscription of 14.3x which put pressure on the stop rate to lose 85 basis points and close at 7.35% from 8.20% at the previous auction.
On Monday, the Nigerian local currency weighs less against the United States dollar at the Investors and Exporters Window as more naira was demanded to buy a greenback.
The naira depreciated by 0.2 per cent to N411.67 a dollar at the window but remained flat at N515.00 a dollar at the parallel market following a slowdown in liquidity level.
The reduction in financial system liquidity mounted pressure on interbank rates on the first trading day in the new week. The overnight lending rate expanded by 25 basis points to 17.5% due to the absence of significant inflows in the system.
In its market report sent to clients, Cordros Capital said the Nigerian Treasury Bills secondary market closed with bearish sentiments as yields on traded instruments expanded.
Specifically, analysts said the average yield expanded by 23 basis points to 4.9%. Across the benchmark curve, analysts see average yield expanded at the short (+45bps), mid (+16bps) and long (+10bps) segments due to sell-offs.
The market recorded sell-offs on the 87-day to maturity bills, up 124 basis points, 164-day to maturity jumped +23 basis points while 192-day to maturity increased 20 basis points respectively. Elsewhere, the average yield at the OMO segment closed flat at 7.7%.
Similarly, Codros told clients trading in the Treasury bond secondary market was mixed, albeit with a bearish tilt, as the average yield expanded by 3 basis points to 11.5%.
Across the benchmark curve, average yield expanded at the short (+8bps) end due to the sell-off of the JAN-2022 (+44bps) bond but was flat at the mid and long segments.
This mid-week, the Nigerian debt management office will be conducting a primary market auction where a total of N150 billion will be offered across the FEB 2028, MAR 3036, and MAR 2050 instruments.
Read Also: Yield on Bond Rises as Naira Depreciates at Investors Window
Afrinvest forecasts quiet sessions in the Federal Government of Nigeria Bonds secondary market as investors focus on the auction. It is also expected that rates will adjust further at the primary market auction given the recent trend in the market.
Bonds, Treasury Bills Yields Rise as Naira Depreciates
