Nigerian T-Bills Yield Climbs after Auction Rates Repricing
The average yield on Nigerian Treasury bills climbed marginally amidst cold trading activities in the secondary market. Transactions conducted on bills in the secondary market were influenced by a recent increase in spot rates on 91- and 182-day Treasury bills by the apex bank.
In addition, market players are weighing the impacts of inflation pressures on their respective portfolio returns amidst a steep increase in liquidity level in the financial system.
Last week, the Nigerian Treasury Bills secondary market sustained its bullish momentum which was largely influenced by investors’ demand for the new 1-Year bill.
The strong rally in the secondary market on the government’s short-term borrowing instruments led to 250 basis points (bps) decline at the close of the week’s trading session.
Rates in the money market back down from further climbing as funds inflow hit the financial system. As a result, the overnight lending rate contracted by 533 basis points to 24.6%, in the absence of significant pressures.
Data from FMDQ showed that pressures on short-term benchmark money market rates reduced on Monday. The open repo rate (OPR) and overnight lending rate (OVN), closed lower at 18.33% and 19.25%, respectively
Traders said even with mild selloffs, the Nigerian Treasury bills closed on a mixed note. Across the curve, the average yield contracted at the short (-26bps) and long (-1bp) ends.
The decline in the yield curve came following buying interest in the 87-day to maturity (-102bps) and 332-day to maturity (-2bps) bills, respectively.
Conversely, the average yield expanded at the mid (+18bps) segment as investors sold off the 101-day to maturity (+144bps) bill. Elsewhere, the average yield contracted by 2bps to 14.7% in the OMO segment.
Last week, system liquidity surged higher by 667.2% to close at ₦527.1 billion. Nonetheless, the price of liquidity in the banking system, the OPR and OVN rates rose 2.9ppts and 2.4ppts respectively to 23.8% and 24.6%.
At the primary market segment for T-bills, the Central Bank of Nigeria (CBN) offered bills worth ₦211.7 billion across the 91, 182, and 364-day tenors. Investors posted N9.7 billion into 91-day bills, N1.8 billion into 182-day bills and N199.9 billion into 364-day bills.
Afrinvest reported that demand was healthy across all ends of the curve as the average bid-to-cover ratio printed at 5.8x due to robust system liquidity. Naira Devaluation Deepens Economic Crisis in Nigeria
Stop rates across the 91-day and 182-day instruments improved, rising 100bps apiece to 7.0% (91-day) and 11.0% (182-day). Meanwhile, the stop rate remained unchanged at 16.8% in the 364-day instrument.
