Treasury Bills Yield Jumps 11 Basis Points after CBN Auction
The average yield on Nigerian Treasury Bills expanded 11 basis points in the secondary market on Thursday to 4.8% after the Central Bank (CBN) conducted a primary market auction mid-week.
Results of the auction show that the spot rates on 91-day and 181-day treasury bills settled at 2.5% and 3.4999%, according to the Central Bank data.
In a twist of an event, the spot rate on 364- day bills which has been on the decline jumped to 7.2% from 6.8% as analysts predicted further slowdown could trigger asset switch into the equity market.
Despite yields slowdown in the fixed income space, subscription level at the Central Bank of Nigeria primary market came strong, especially for long-dated tenor instruments.
Meanwhile, activities in the foreign exchange market ended on a mixed note. The naira stayed flat at N411.67 to a United States dollar at the Investors and Exporters foreign exchange window.
However, the local currency depreciated by 0.9% to N540.00 in the parallel market, widening further arbitrage opportunities in the economy.
There was a run on the financial system liquidity as short term borrowing and lending rates expanded in reaction to strained liquidity on Thursday. Data from FMDQ shows that open buyback saw a 367 basis points jump to 12.50%.
Also, the overnight lending rate expanded 367 basis points to 13.0% due to funding pressures from net Nigerian Treasury Bills issuances worth N71.34 billion.
In a market report, Cordros Capital said the Treasury bills secondary market was bearish as the addition of new bills from yesterday’s primary auction led the average yield to expand by 4.8%.
Analysts said across the benchmark curve, the average yield was flat at the short and mid segments, but contracted at the long (-16bps) end following demand for the 245DTM (-108bps) bill.
Elsewhere, the average yield at the open market operations (OMO) segment expanded by 8 basis points to 6.2%. Earlier in September, CBN conducted open market operations where it issued 82-day, 157-day and 327-day bills.
Spot rates on these bills printed at 7%, 8.5% and 10.1%, according to data obtained from the Central Bank. Trading in the Treasury bond secondary market was mixed, albeit with bullish bias, as the average yield contracted by 3bps to 11.0%.
Read Also: Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%
Across the benchmark curve, average yield contracted at the short (-9bps) end due to investors’ demand for the APR-2023 (-43bps) bond, but was unchanged at the mid and long segments.
Treasury Bills Yield Jumps 11 Basis Points after CBN Auction
