Average Yield on Nigerian Treasury Bills Drop Further

Average Yield on Nigerian Treasury Bills Drop Further

The Nigerian Treasury Bills  secondary market traded actively last week, with bullish sentiments observed on the back of healthy system liquidity levels, Afrinvest has stated in a note.

The investment firm said average yield across all tenors dipped 17 basis points week on week to close at 1.8% ON Friday.

With inflation rising, yield on fixed income has been negative, though Sonnie Ayere, the Chief Executive at Dunn Loren Merrifield Limited told MarketForces that the rates of risk free instrument are  not meant to cover inflation rate.

In a note, Afrinvest said although system liquidity opened at ₦86.9bn on Monday, it rose to ₦470.4 bn by Thursday following inflows from matured Open Market Operation bills  of ₦25.4bn, Federal Account Allocation Committee disbursements of about ₦430.0bn and bond coupon payments of about ₦94.4bn.

“Consequently, average yield across all tenors dipped 17bps W-o-W to close at 1.8% on Friday“, Afrinvest stated.

The firm explained that most of the trading activities occurred at the short- and mid-term bills while the long-term instruments traded relatively flat.

Notably, the 15-Oct-20 (-55bps), 27-Aug-20 (-49bps) and 29-Oct-20 (-47bps) bills recorded the most buying interests.

Analysts recalled that at the Monetary Policy Committee meeting, the Committee retained the Monetary Policy Rate at 12.5% while also holding other monetary policy parameters constant.

According to the MPC, this decision stemmed from the need to evaluate the effectiveness of the various monetary and fiscal measures recently deployed to address the economic downturns following the outbreak of the COVID-19 pandemic.Average Yield on Nigerian Treasury Bills Drop Further

Read Also: Afrinvest Says Maturing T-Bills Will Keep Money Market Rates Down

Afrinvest said going into the week, the Central Bank is scheduled to roll over maturing NT-Bills worth ₦266.0bn through a Primary Market Auction auction on Wednesday.

Additionally, the firm stated that the Apex bank may likely conduct an OMO auction to keep rates and system liquidity in check.

Thus, the anticipated inflow from bond coupon payments of ₦49.6bn may not be sufficient to bolster liquidity.

While this may slightly impact demand, we expect investors’ focus to be skewed towards the PMA“, Afrinvest stated.

Average Yield on Nigerian Treasury Bills Drop Further

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