Yield Ends Lower in Treasury Market as Inflation Rate Ebbs
Average yield ends lower in the Nigeria treasury bills market on Friday as the inflation rate ebbs for sixth months, according to data. National Bureau of Statistics announced a 38 basis points headline consumer price index slowdown for the month of September to 16.63% from 17.01% in August.
Following the Central bank of Nigeria primary market auction conducted mid-week, activities at the Treasury bills secondary market traded on a bullish note.
Nigerian treasury bills instrument in the space declines 2, 12 and 2 basis points at the short, mid and long ends of the curve, respectively, Alpha Morgan Capital said in a report.
Consequently, the average yield slowed down by 7 basis points to close at 5.20% at the time when the financial system liquidity eased.
Data from the FMDQ Exchange platform show there was a runoff on short term interest as interbank rates spiked following a significant outflow recorded in the week. Pressures were seen on both open buy back (OBB) and Overnight lending rates.
Specifically, the overnight (OVN) rate expanded by 550 basis points week on week to 20.0% following debits for cash reserve ratio (CRR), net treasury bills issuances worth N65.57 billion, N50 billion for CBN’s weekly open market operations (OMO) and FX auctions, Cordros Capital said in a report.
At the same time, the financial system liquidity position was boost by N110 billion inflow from OMO maturities, though not enough to stem pressure on liquidity due to the size of outflow.
In the coming week, analysts at Cordros Capital expect the overnight lending rate to trend lower but remain elevated in the double-digit region, given expected outflows for the monthly bond auction and CBN’s weekly auctions, which are likely to offset N85 billion inflows from OMO maturities and N32.67 billion FGN bond coupon payments.
The Treasury bills secondary market ended the week on a bullish note following the improved system liquidity in the early parts of the week and as market participants’ filling unmet demand from Wednesday’s NTB PMA at the secondary market.
Analysts stated that the average yield across all instruments declined by 5 basis points to 5.8%. However, across the market segments, the average yield remained unchanged at 6.5% at the OMO segment but contracted to 5.2% at the Treasury bills segment.
At the mid-week auction, the CBN offered N121.66 billion for sale and eventually allotted N187.23 billion. The sum allotted was split into N4.22 billion of the 91D, N6.95 billion of the 182D and N176.06 billion of the 364D bills.
The low and mid tenor bills stop rates were unchanged at 2.50% and 3.50%. Stop rate on 364-day bills declined to 7.25% from 7.50%, respectively.
Analysts said demand at this auction was very strong, with a subscription level of N493.03 billion, translating to a bid-offer ratio of 4.1x compare with 1.6x in the previous auction.
“We expect yields to further trend lower next week, as investors sustain buying activities in reaction to the moderation in the stop rate of the one-year paper at the last primary market auction”, Cordros analysts projected.
Also, the activities at the federal government of Nigeria secondary market traded somewhat mixed following declines of 7 and 2 basis points at the short and mid ends of the curve while the long end climbed by 1bps in the long end of the curve.
Amidst the quiet trading sessions, the average yield was slightly down by 1bps to close at 11.33% as the secondary market closed the week with mixed sentiments, albeit with a bullish tilt, as investors remained on the sidelines awaiting further clarity on the direction of yields and refocused their attention to corporate instruments.
Across the benchmark curve, the average yield expanded at the short (+2bps) and long (+2bps) ends as investors sold off the JAN-2026 (+20bps) and MAR-2035 (+12bps) bonds, respectively.
However, it declined at the mid (-10bps) segment following demand for the MAR-2027 (-31bps) bond. Analysts at Cordros Capital expect the outcome of the bond auction to shape market sentiments and the direction of yields.
At the auction, the DMO will be offering instruments worth about N150.00 billion through re-openings of the 12.50% FGN JAN 2026, 16.2499% FGN APR 2037 and 12.98% FGN MAR 2050 bonds.
Elsewhere, activities at the Federal Government Eurobond market traded on mixed sentiments, with the average yield slowed down 12 basis points to close at 6.38%. #Yield Ends Lower in Treasury Market as Inflation Rate Ebbs
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