Treasury Bills Yield Climbs 293bps to 9.7% -MarketNews
The average yield on the Nigerian Treasury bill (NTB) climbed by 269 basis points in the secondary market as a result of massive asset sales following the apex bank market decision to reduce spot rate on 364-day bills.
Banks kept holding in the market steady while other portfolio investors’ risk-off sentiment switched to selloffs on Treasury bills following the Central Bank of Nigeria’s (CBN) naira devaluation.
Following buckets of twists in the financial market, investors’ sentiments in the NTB secondary market remained bearish. Weak liquidity level supported sustained sell-offs across the curve.
As a result, the average yield across all instruments increased by 269bps to 9.7%, according to Cordros Capital Limited’s market update shared with investors via email.
Across the market segments, traders noted that the average yield expanded by 293bps to 9.7% in the T-bills segment and advanced by 124 basis points to 9.7% in the OMO bills secondary market. Banks Face Risks over 24hrs FX Positions Sell Down
Last week, the CBN offered OMO Bills instruments worth N350.00 billion at the primary market auction it conducted. The offer was split into N75.00 billion for the 92-day, N75.00 billion for the 183-day, and N200.00 billion for the 365-day bills – to participants.
Total subscription at the auction settled at N533.80 billion with more demand skewed towards the longer-dated bill, attracting N518.80 billion. The auction closed with the CBN allotting precisely what was offered at respective stop rates of 10.00% (previously 10.00%), 13.50% (previously 13.50%), and 17.00% (previously 17.50%).
“Yields in the Treasury bills secondary market will likely rise further next week, as our expectation of a possible liquidity dearth might weigh on bill demand”, said Cordros Capital.
On Wednesday, the apex bank is scheduled to conduct a treasury bills primary market auction. According to auction calendar, a total of N417.06 billion worth of maturities would be offer to market participants.
In the money market, benchmark short term interest rates increased as liquidity level dropped. The overnight lending rate expanded by 237 basis points to 21.2%, traders said.
Analysts explained that settlements from the FGN bond worth N418.20 billion and OMO bills NN350.00 billion auctions outweighed the inflows from FAAC disbursements totaled N743.13 billion.
Consequently, the average system liquidity closed lower at a net long position of N133.10 billion as against a net long position of N487.45 billion in the previous week.
“we anticipate a further squeeze in system liquidity as the expected sole inflow from OMO maturities of N26.00 billion may be insufficient to support the financial system amid a possible net NTB issuance”, Cordros Capital said in its market note. #Treasury Bills Yield Climbs 293bps to 9.7% -MarketNews
