Spot Rate on 364-Day T-Bills Dips 34bps to 5%

Spot Rate on 364-Day T-Bills Dips 34bps to 5%

Spot rate on 364-day Nigerian Treasury Bills slumped 34 basis points to close at 5% at the primary market auction conducted by the Central Bank of Nigeria in the just concluded week.

The auction was conducted to rollover maturing bills, was heavily subscribed as investors coffers are filled with funds begging to play in the financial markets. Rising demand however dragged down spot rates at the lower and high end of the curves.

Unfortunately, there are limited alternative investments, thus entrenching without option, negative returns on investors’ portfolios, though some experts have explained that the fixed income market has no reason to pay a premium on instruments.

“Investors take no risk here”, a number of experts informed MarketForces Africa. Meanwhile, some fixed income market critics see average returns trending below the average inflation rate as financial repression.

At the bi-weekly Nigerian Treasury Bills primary market auction, demand remained sizeable, as the N5.86 billion worth of bills on offer were oversubscribed by 11.5x. According to Cowry Asset note, the apex bank allotment was to completely refinance the same amount of matured treasury bills.

But spot rates on 91-days and 364-days missed some basis points while spot on mid-tenor bills was excused from slowdown. The auction result shows that the 364-day bill was issued at a lower rate amid heavy demand for the long duration instruments. 

The auction closed with the CBN allotting N960.66 million of the 91-Day, N1.10 billion of the 182-Day and N3.80 billion of the 364-Day. Following the previous pattern at the midweek auctions, the stop rate for the 364-day bill moderated further to 5.00% from 5.34%. It has peaked at 7.5% -sometimes in the third quarter of 2021.

There was however a new development, marginal decline in stop rate for 91-Day bill to 2.49% from 2.50%, though the stop rates for 182- Day bill was flat at 3.45%. The previous auction had seen a 0.05% decline in 182-bills also.

In tandem with the declining rate, yields in the secondary market fell amid buy sentiment, according to Cowry Asset Management Limited note.

Hence, Nigerian Interbank Treasury Bills True Yield fixing (NITTY) for 1 month, 3 months, 6 months and 12 months moderated to 2.83% from 3.06%, 3.28% from 3.55%, 4.08% from 4.47% and 5.66% from 5.89% respectively.

Analysts explained that NITTY is a reference rate for tenored money market instruments. According to analysts note, given the inflow of matured OMO bills worth N40.00 billion, the Nigerian Interbank Borrowing Rate (NIBOR) fell for most tenor bucket tracked.

Cowry Asset note shows that 1 month, 3 months and 6 months NIBOR moderated to 9.63% from 10.07%, 10.40% from 10.77% and 10.55% from 11.73% respectively. However, the overnight tenor bucket settled at 14.50% from 12.83%.

In the new week, analysts at Cowry Asset expect activity in the money market to be slightly bullish as the market expects a liquidity boost from the maturing N45.00 billion worth of OMO bills.

According to analysts polled by MarketForces Africa,  the recent developments in the fixed income market has signalled that lower yields on T-bills would persist following expected improved buying activities in reaction to the lower rates on recently (re)issued bills.

Read Also: Yield Dips After Spot Rates on 182-Day, 364-Day T-Bills Fall