Yield Rises as Liquidity Squeeze Provokes T-Bills Selloffs
The average yield on Nigerian Treasury bills surged as tight liquidity in the financial system provoked rapid selloffs in the secondary market. In the money market, the overnight Nigerian interbank borrowing rate increased by 155bps to close at 32.93%, according to Cowry Asset Management Limited.
The surge in interbank rate indicated there was a shortage of liquidity in the system, analysts explained in a note to investors. Equally, key money market rates like the open repo rate (OPR) and overnight lending rate (OVN) surged to 32.09% and 33.34%, respectively, according to data from FMDQ Securities Exchange.
In its market update, Cordros Capital Limited specifically told investors that the overnight lending rate expanded by 198 basis points to close at 33.34% on Wednesday. Repo rate saw 170 basis points increase to settle at 32.09%.
The significant increase in short term benchmark interest rates came following debits for the April 2024 Debt Management Office (DMO) FGN bond primary market auction sales worth N626.81 billion. Naira Skids as FX Turnover, External Reserve Decline
Due to Nigerian treasury bills selloffs in the secondary market, the average yield expanded significantly by 9bps to 18.9%. Across the curve, Cordros Capital Limited said the average yield pared at the short (-1bp) and mid (-1bp) segments.
The yield contraction followed mild interests on the 85-day to maturity, resulting to 1bp decline in its yield line. The market always witnessed buying interest in 162-day to maturity, which also resulted in 1bp decline in yield.
On the other hand, yield curve increased at the long end of the curve, up by18bps as market participants sold off the 344-day to maturity, which resulted in 235bps decline in its yield.
Similarly, the average expanded by 31bps to 18.5% in the OMO bills segment in the secondary market. Equities market rebounded following streaks of large losses from selloffs.
The Banking (+1.10%) and Insurance (+0.58%) indices closed in the green, following the price uptick in FBNH (+6.93%) and CORNERST(+8.77%), respectively. Conversely, the Consumer Goods (-0.05%) index fell following a dip in INTBREW (-2.17%). The industrial goods and oil and gas indexes closed flat.
