Nigerian Treasury Bills Yield Picks Up as Liquidity Falls
After falling below 4%, the benchmark yield in Nigerian Treasury bills picked up in the secondary market as investors dumped some naira assets. The treasury bills market has been mostly bullish in 2024 as investors expect new issuance from government agents.
Asset, fund managers have been flocking to the secondary market in a bid to reposition their portfolios for higher returns. Still, less than 6% of pension assets are invested in Treasury bill instruments.
To effect the borrowing plan, some traders expect the Central Bank of Nigeria (CBN), on behalf of the federal government to issue bills at relatively higher spot rates in 2024.
Reversing the bullish trend witnessed earlier in the week, trading activities in the T-bills secondary market turned 360 degrees on Wednesday. The selloffs pushed the average yield higher by 19 basis points to 4.0%.
In its market update, analysts at Cordros Capital Limited said across the curve, the average yield closed flat at the short and mid segments.
However, yield expanded at the long (+32bps) end following selloffs of the 316-day to maturity (+419bps) bill. Meanwhile, the average yield remained at 8.4% in the OMO bill segment as funding pressures hit the financial system.
Due to a liquidity squeeze in the money market, short-term benchmark interest rates ascended to double-digits from single digits earlier reported this week. Naira Lost 11% as Banks Issue New Update on FX Spending
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), increased by 9.52% and 8.40% to close higher at 14.15% and 15.40%, respectively.
In an update, Cowry Asset Limited said overnight Nigerian Interbank borrowing rate (NIBOR) experienced a 1.40% increase, to reach 13.75%, indicating liquidity strain in the system.
In the bond market, analysts reported that proceedings were bearish, as the average yield expanded slightly by 1bp to 13.5% ahead of inflation data released and the debt management office borrowing schedule.
