Treasury Bills Yield Steadies as Naira Falls
The benchmark yield on Nigerian Treasury bills was steadied as risk sentiment on the naira asset has shifted amidst uncertainties in economic direction. Still tracking behind the annual inflation rate, the yield has been hovering around 10-11% lately after moderate asset repricing.
There was a relatively quiet trading session in the secondary market despite a slowdown in the liquidity level in the financial system. Usually, a dip in liquidity often spurs selloffs on treasury instruments as banks seek to augment their liquidity demand.
Data from FMDQ showed that the overnight lending rate expanded by 348 basis points to 20.6%, following the debits for the OMO auction (N77.20 billion) conducted yesterday – as per Cordros Capital’s market report.
Trading in the T-bills secondary market was calm though, as the average yield remained at 11.13% versus an annual inflation rate of 26.72%. The headline inflation rate is projected to rise further due to depreciation of the local currency, and subsidy removal.
Across the curve, Cordros Capital analysts said the average yield was flat at the short and mid segments but pared at the long (-1bp) end. This was a result of mild interest in the 329-day to-maturity (-1bp) bill.
After the primary market auction conducted by the apex bank, trading activities in the OMO segment were quiet. Thus, the average yield was unchanged at 12.0%.
While the Nigerian Interbank Treasury Bills True Yield (NITTY) exhibited mixed movements on Thursday across all tenor options, traders are projecting that yield would rise before the year’s close.
In the foreign exchange market, the naira depreciated by 0.9% to N793.28 on US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM). The local currency is facing multiple pressures due to a shortage of FX supply. However, the apex bank has launched a fresh move to clear FX backlog.
Analysts see the development as positive for the economy, saying the move will improve investors’ sentiment. In the secondary market for FGN Bonds, trading on Thursday exhibited mixed results. The average yield inched slightly higher by 5 basis points (bps) to reach 15.42%.
This increase was primarily driven by yield expansions of 51 and 35 basis points observed in the MAR-50 and FEB-28 FGN bonds, respectively, according to Cowry Asset Limited.
In Nigeria’s sovereign Eurobonds market, there was a positive level of activity. Buy sentiment was evident across the short, mid, and long ends of the yield curve, leading to a decline in the average yield by 48 bps to 11.14% on Thursday. N5bn for Presidential Yacht Emanated From Navy Not Tinubu – Presidential Aide
