Investors Ramp Up Treasury Bills as Market Speculates on Rates Cut
The average on Nigerian Treasury bills declined in the secondary market ahead of the primary market auction (PMA) as investors increased their position on the expectation that spot rates on standard offers would fall.
Due to speculation that the monetary authority would adjust spot rates across standard maturities at the primary market auction, fixed income assets traders increased their Treasury bills buying in the secondary market.
The market saw the average mid-rate nosediving due to sparling interest in bills across the short end, belly and long tenors. The average yield contracted by 19 basis points to close at 20.9% in the market. MarketForces Africa reported that the Central Bank of Nigeria (CBN) is scheduled to conduct primary market auction midweek.
Investment banking firms revealed in their separate notes that the CBN would be offering T-bills worth N233.31 billion to investors in the primary market auction today. Mirroring the current mood, analysts projected that spot rates could drop as they were with the OMO auction.
The Nigeria’s Debt Management Office (DMO) that is going to conduct the auction on behalf of the CBN has been unwilling to increase rates as part of efforts to reduce government borrowing costs.
Analysts said rates have been slowing down, reversing the previous trend with the hope that disinflation condition will be sustained throughout the remaining part of the year. They anchored their expectation on elevated yield in the market and recent inflation rate slowdown which has reduce negative interest yield in the fixed interest securities market.
In a note, Cordros Capital Limited said the average yield declined at the short (-1bp), mid (-1bps), and long (-39bps) segments. The yield contraction was driven by demand for the 65-day to maturity (-1bp), 156-day to maturity (-2bps), and 233-day to maturity (-270bps) bills, respectively.
Meanwhile, the average yield pared by 1 bp to 22.8% in the OMO bill segment after the primary market auction earlier in the week.
“We expect the outcome of the Treasury bills auction and liquidity to impact the market,” AIICO Capital Limited said in a note. On Tuesday, the Nigerian Interbank Treasury Bills True Yield (NITTY) trended downward across all maturities. #Investors Ramp Up Treasury Bills as Market Speculates on Rates Cut Naira Falls to N1,486 as FX Crisis Deepens
