Higher Spot Rates on T-Bills Auction Drive Yields Upward
Reacting to higher spot rates on the Central Bank of Nigeria’s (CBN) primary market auction for Nigerian Treasury Bills (NTBs), average yields on fixed income securities track higher. After a 150 basis points increase in the monetary policy rate in May, the market has seen an upward yield repricing in general.
The uptrend had paused due to a slow down in the issuance of government securities. However, higher inflation and uncertainties in the international debt capital market following rising interest rates in developed markets spur an expectation of local borrowings in the second half.
Nigeria’s debt office recently indicated that it will raise N720 billion from FGN Bonds in the next three months. At the primary market auction for the Nigerian Treasury bills, the spot rate on 91-day instruments inched up from 2.4% to 2.75% due to a tighter subscription level.
The total subscription on the mid-tenored Nigerian treasury bills was a bit higher at N1.943 b billion compared with N1.457 billion offered to market participants. While CBN allotted N1.489 billion, the associated spot price on 182-day bills inched higher to 4% from 3.79%.
Meanwhile, 364-day bills see a higher spot rate increase to 7% from 6.07% in the previous auction with a total subscription that printed at N138.911 billion, a little higher than N137 billion offer while CBN eventually allotted N97.814 billion.
Trading activities on the Nigerian fixed interest securities ended on a mixed note on Thursday as yields curve converse while liquidity strain keeps short-term rates movement in check.
In the money market, pressures on the financial system liquidity bear upon short-term rates as the average interbank rate maintained its previous position yet again to close at 13.92%.
Data from FMDQ Exchange shows that the Open Buy Back rate and Overnight lending rate closed flattish. Open buy back ended the day at 13.83% while the overnight rate stopped at 14.00%, according to market data.
In the secondary market for the Nigerian Treasury bills, trading activities ended on a relatively quiet note as a result of thin transactions across the curve. Overall, the average rate inched up by 4 basis points to close at 6.71%.
Across the curve, Codros Capital said in its market report that the average yield was flat at the short and long ends but expanded at the mid (+18bps) segment following profit-taking on the 196-day to maturity (+72bps) bill.
Elsewhere, the average yield closed flat at 7.4% in the open market operations (OMO bills) segment. FGN Bond exhibited a much similar bearish pattern. Trading activities at the space were somewhat bearish. As a result, the average yield inched forward by 9 basis points to close at 11.41%.
Across the benchmark curve, traders said the average yield expanded at the short (+21bps), mid (+7bps), and long (+2bps) ends as investors sold off the MAR-2024 (+65bps), JUL-2030 (+17bps), and MAR-2050 (+15bps) bonds, respectively.
Elsewhere, Alpha Morgan Capital said in a note that market participants in the FGN Eurobond space continued with their bearish stance from the previous trading session. READ: Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%
Traders noted that the negative sentiments persisted following selling pressures across the sovereign curve, thus the average yield was up by 61 basis points to close at 14.88%. #Higher Spot Rates on T-Bills Auction Drive Yields Upward