Elevated Yield: Investors Raise Bets on Nigerian Treasury Bills
The average yield on Nigerian Treasury bills yield declined on slightly following surge in demand for money market instruments across short, belly and long end of the curve in the secondary market.
Ahead of inflation data, there are some analysts that believe that the apex bank would increase benchmark interest rate to anchor surging consumer price index. Inflation printed higher at 30 years high of 33.20% in March, while projections suggest that price pressures would worsen in April, May and June, 2024 due to weak macros related issues.
Increase bets on Nigerian Treasury bills occurred despite tight liquidity level in the financial system. According to information obtained from FMDQ Securities Exchange, short term benchmark interest rates expanded as funding pressures exacerbated.
The overnight interbank borrowing rate rose by 1.07% to close at 29.18% signaling system illiquidity, said Cowry Asset Management Limited in an update.
Likewise, Key money market rates, such as the open repo rate (OPR) surged by 116 basis points to 28.59%, according to data from FMDQ platform.
Also, the overnight lending rate expanded by 100 basis points to 29.47%, amid debits for the OMO auction worth conducted by the Central Bank of Nigeria on Monday where a total of N260.65 billion was allotted to market participants.
With expectation to boost returns, investors raised bets on Treasury bills in the secondary market. The move dragged yield curve downward. Traders said the average yield contracted by 4 basis points to 22.5%.
In its market update, Cordros Capital Limited told investors that the average yield declined at the short (-2bps), mid (-1bp) and long (-7bps) segments. The yield contraction was driven by investors’ interest in the 65-day to maturity (-2bps), 170-day to maturity (-1bp) and 233-day to maturity (-40bps) bills, respectively.
Similarly, the average yield pared by 1bp to 18.7% in the OMO bills segment in the fixed interest securities market on Tuesday, according to traders. UBA Grows Net Profit by 165% to N142.5bn
