Inflation Dwarfs Yield on Nigerian Treasury Bills
Despite changing appetite across curve, the average yield on Nigerian Treasury bills remained elevated but tracking at distance against accelerating inflation rate.
Fixed interest securities traders said there was sell pressure on treasury bills in the secondary market midweek as investors seek to boost liquidity. The amount in the system contrast due to outflow of funds for Federal Government of Nigeria auction sales.
A total sum of N682 billion left the financial system as debit for FGN bond auction conducted by Debt Management Office. This caused a drain to the liquidity level, causing money market short term interest rates to climb further.
Details obtained from FMDQ Securities Exchange platform showed that the overnight lending rate expanded by 125 basis points to 31.8% after debits for the May 2024 FGN bond auction.
In its market update, traders told investors that trading in the T-bills secondary market ended on a mixed note with bearish tilt. Investors’ appetite switched.
The sell down in treasury bills asset lifted yield higher. As a result, the average secondary market yield for Nigerian Treasury Bills increased by 0.05% to close at 21.40%, Cowry Asset Management Limited said in its market update. This continue to track below inflation which printed higher at 33.69%.
Traders at Cordros Capital Limited said across the curve, the average yield declined at the short (-1bp) and long (-8bp) ends driven by interests in the 22-day to maturity (-2bps) and 302-day to maturity (-51bps) bills, respectively.
Conversely, the average yield advanced at the mid (+10bps) segment as players took profits off the 162-day to maturity (+33bps) bill. Likewise, the average yield contracted by 1bp to 20.1% in the OMO segment.
In the money market, the overnight interbank rate increased by 0.05% to reach 30.80% due to tightening liquidity conditions. Short-term benchmark rates such as the open repo rate (OPR) and overnight lending rate (OVN), advanced by 1.19% and 1.25% to reach 30.88% and 31.84%, respectively. CPPE Advocates Flexible Monetary Policy Stance to Address Inflation
