Fixed Income Investors Boost Treasury Bills Holdings, Yields Ease
The average yield on Nigerian Treasury bills traded in the secondary market declined by 4 basis points (4bps) as trading activity opened positively following a sharp capital rotation away from the stock market.
With excess liquidity in the financial system on Monday, the Treasury bills market saw investors pile into positions ahead of inflation data, which is expected to rise further due to the geopolitical crisis.
The consumer price index is expected to exceed 16%, with the outlook remaining negative amid renewed Middle East concerns.
Nigeria is still paying inflation-protected rates to borrow in the money market, reflecting the monetary policy tightening that kept the benchmark interest rate at 26.5%.
Due to increased buying interest, yields on naira assets contracted at the short (-5bps) and long (-4bps) ends of the curve, particularly on the 03-SEP (-27bps) and 08-JUL (-17bps) papers.
The market recorded investor interest in Treasury bills with September 3 and July 08 expirations, dragging their yields lower on Monday.
Hence, traders reported that robust trading volumes and firm investor appetite pulled the average Nigerian Treasury Bills yield down by 4 bps to 18.47%.
The fixed income market closed the previous week bullish, as broad-based buying interest across the secondary market was supported by favourable liquidity conditions.
System liquidity expanded by N1.46 trillion to N4.33 trillion, buoyed by an OMO maturity of N2.21 trillion. The market stayed liquid despite the midweek treasury bills auction.
At the auction, the Debt Management Office (DMO) offered N700 billion in Nigerian Treasury Bills across the 91-day, 182-day, and 364-day tenors.
Demand came in at N2.03 trillion, higher than the N1.86 trillion recorded at the prior auction. However, the DMO allotted N1.06 trillion, lower than the N1.49 trillion at the prior auction.
Demand remained skewed toward the long end of the curve, with the 364-day paper attracting N1.86trn of total subscriptions. Stop rates cleared at 16.30%, 16.50%, and 17.70% p.a. across the 91-, 182-, and 364-day bills.
Notably, the 364-day stop rate saw the sharpest move, widening by 36 bps relative to the prior auction, reflecting a sustained aggressive borrowing stance for the quarter. Sentiment across the secondary market was broadly bullish.
The OMO segment was the stronger performer, with yields easing by 18 bps w/w to settle at 21.58% p.a. The NTB segment followed, with yields tightening by 14 bps w/w to close at 18.51% p.a.
