Pressures Expected on Spot Rates as Demand for T-Bills Rises
The average yield tracks lower as fixed securities investors demand for the Nigerian Treasury Bills (NTB) hits the roof, according to traders’ data obtained at the just concluded week.
In their separate projection for the new week, fixed income traders are expecting spot rates to see moderate pressures due to expected inflow into the financial system from the maturing bills. The subscription level at the next primary market auction is also expected to be heavy as market jostles for investment options.
In the just concluded week, Treasury Bills primary market was quiet. The Central Bank of Nigeria (CBN) did not conduct a primary market auction, causing investors to jostle for position in the secondary market.
Consequently, record demand for Treasury instruments depressed average yield across the curve. Some traders have projected that yield on the fixed instrument would likely remain subdued due to the level of funding in the financial market.
Specifically, Nigerian Treasury Bills True Yield fixing (NITTY) for 1 month, 3 month, 6 months and 12 months maturities moderated to 2.66% (from 2.71%), 3.32% (from 3.47%), 4.03% (from 4.37%) and 5.21% (from 5.77%) respectively, according to market data.
In a market note, Cowry Asset also hinted that there were relatively higher sales at the OMO market as CBN sold N60.00 billion bills, howbeit, lower than the N135.90 billion worth of OMO bills which matured – hence, leading to a net inflow of N75.90 billion.
The Nigerian Interbank Offer Rate (NIBOR) for 3 months and 6 months tenor buckets fell to 10.83% (from 10.91%) and 11.35% (from 11.38%) respectively, according to analysts note.
However, as liquidity dried up towards the end of the week Overnight and 1-month rates rose to 17.50% (from 4.00%) and 9.63% (from 9.59%) respectively. Read: Yield Dips After Spot Rates on 182-Day, 364-Day T-Bills Fall
In the new week, T-bills worth N345.28 billion will mature via the primary and secondary markets to exceed T-bills worth N115.28 billion which will mature via the primary market; through 91-day bills worth N20.44 billion, 182- day bills worth N22.86 billion and 364-day bills worth N90.38 billion.
“We expect the stop rates to marginally decline amid a huge amount of maturing bills”, Cowry Asset said.
In the just concluded week, the Debt Management Office (DMO) allotted N297.39 billion worth of bonds: N103.47 billion for the 12.50% FGN JAN 2026 and N193.92 billion for the 13.00% FGN JAN 2042.
Due to heavy oversubscription, Stop rates for FGN JAN 2026 fell further to 10.95% from 11.50% while FGN JAN 2042, was done at a flat stop rate of 13.00%.
Given the moderation in stop rate for FGN JAN 2026, investors went bullish in the secondary market, leading to an increase in the value of FGN bonds traded for all maturities tracked.
Interestingly, the 10-year, 16.29% FGN MAR 2027 paper and 15-year 12.50% FGN MAR 2035 bond gained N2.48 and N1.34; their corresponding yields moderated to 10.90% (from 11.50%) and 12.46% (from 12.67%) respectively.
Also, the value of 20-year 16.25% FGN MAR 2037 debt and that of the 30-year 12.98% FGN MAR 2050 instrument increased by N0.94 and N0.19; their corresponding yields fell to 12.70% (from 12.82%) and 12.95% (from 12.97%) respectively.
Elsewhere, the value of FGN Eurobonds traded at the international capital market depreciated for all maturities tracked on bearish sentiment. The 10-year, 6.375% JUL 12, 2023 bond, the 20-year, 7.69% FEB 23, 2038 paper and the 30- year, 7.62% NOV 28, 2047 debt lost USD0.14, USD0.42 and USD0.68 respectively.
Their corresponding yields rose to 3.76% (from 3.70%), 9.22% (from 9.17%) and 9.28% (from 9.20%) respectively.
“We expect the value of FGN Bonds, especially for 42s to increase (and yields to fall) amid increased demand due to the N345.26 billion maturing bills in the money market”, Cowry Asset in a market report. # Pressures Expected on Spot Rates as Demand for T-Bills Rises
