Treasury Bills Yields Subdued as Nigeria Naira Falls
The buying mood remains steadied following spot rate adjustments by the Central Bank of Nigeria (CBN) at a recently conducted primary market auction. Increased demand for government short-term borrowing instruments has forced yield to backtrack even as Nigeria’s inflation rate bites harder.
Traders relate a trillion naira subscription level registered at the apex bank primary market auction last week, and buying momentum in the equities space to increased money supply in the economy. Albeit, the amount in the financial system has come under pressure and analysts are projecting short-term interest rates to spike further this week.
According to a market update from Cordros Capital Limited, the overnight lending rate expanded by 217 basis points to 19.4%, in the absence of any significant outflows of funds from the system. Liquidity in the system was impacted by debit for Treasury bills auction and OMO bills market sales.
With these market developments, Treasury bills’ secondary market activities stayed calm. The average yield remained at 3.18%. Elsewhere, the average yield was flat at 8.4% in the OMO segment. Market analysts saw funding pressure and this may persist throughout the week.
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), surged and concluded at 18.67% and 19.42%, respectively, traders at Cowry Asset Limited said in a market update.
In the bond market, the average yield expanded by 18bps to 13.5%. Across the benchmark curve, the average yield advanced at the short (+21bps), mid (+46bps) and long (+7bps) segments. The increases followed market participants’ investment decision to sell off the APR-2029 (+85bps), JUL-2030 (+64bps) and JUL-2034 (+50bps) bonds, respectively.
In the foreign exchange market, the Nigerian local currency, the naira crossed 931 to the US dollar as demand for foreign currency jerked up. The parallel market rate crossed N1300 with speculators having fun with more than 40% as the spread between two FX spot rates.
