Fresh Demand for Nigerian T-Bills Drags Yield to 16%
The market experienced increased demand for Nigerian treasury bills at the start of the week despite a liquidity crunch in the financial system.
The raft of buying interest was experienced as analysts forecasted that the Central Bank (CBN) monetary policy committee (MPC) would aggressively hike the benchmark interest rate.
The recent auction sales conducted by the apex bank and debt management office strongly drained the liquidity level in the market. This forced local banks to borrow N1.4 trillion from the central bank’s standing lending facility on Friday.
Due to buckets of demand for treasury bills in the secondary market on Monday, the average yield declined by 4 basis points to 16.6%.
MarketForces Africa reported that at the midweek auction sales conducted last week, the CBN maintained a spot rate on 364-day bills at 19% versus an average OMO Bills of 18%.
Across the curve, Cordros Capital Limited told investors via its market update that the average yield on Nigerian treasury bills contracted at the short (-1bp) and long (-8bps) ends.
The market experienced buying interest in the 87-day to-maturity bills whose yield dropped by 2bps and 346 days to maturity whose yield declined by -57bps) bills, respectively.
Conversely, the average yield expanded at the mid (+2bps) segment due to the sell-offs on the 178 day to maturity with a +23bps yield jump. Elsewhere, the average yield advanced by 35bps to 18.1% in the OMO segment.
In its note, Cowry Asset Limited said interbank rates climbed across maturities, reflecting a liquidity crunch in the system. However, short-term benchmark interest rates declined in the absence of significant pressures in the money market.
However, key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN) declined. The overnight lending rate contracted by 150bps to 24.3%. The open repo rate declined by 136 basis points to 23.55%, according to data from the FMDQ platform.
Activities in the FGN bond secondary market were bearish, as the average yield increased by 2bps to 16.7%. Across the benchmark curve, the average yield advanced at the short (+1bp) and long (+4bps) ends.
This happened as market players took profits off the MAR-2024 (+3bps) and JUN-2038 (+41bps) bonds, respectively. The average yield was unchanged at the mid-segment. #Fresh Demand for Nigerian T-Bills Drags Yield to 16%
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