Interest Rate Sensitive Nigerian T-Bills Yield Spikes to 25%
Ahead of auction, rate hike expectation, the average yield rose near 25% as the market saw investors exiting their positions in the Nigerian Treasury bills ahead of auction.
With inflation conditions, the market has been earnings negative yield on naira assets on the back of sizeable liquidity in the economy, and financial markets.
After an unimpressive OMO auction that resulted to no sale, the Central Bank of Nigeria (CBN) will be conducting primary market auction to refinance maturing bills this week.
The Debt Management Office, on behalf of the CBN, is expected to roll over N277.96 billion worth of maturities midweek after the CBN must have announced outcome of its policy committee.
In the secondary market last week, interest rate sensitive Nigerian Treasury bills yield rose sharply as investors offloaded naira assets in anticipation of rate hike by the monetary authority.
In a notice, the apex bank announced that its monetary policy committee will be meeting from Monday to Tuesday to review changing market dynamics.
Analysts are projecting that benchmark interest rate would be adjusted upward, though, investment firm differ on exact figure. Since the last meeting, inflation rate has grown, albeit slowly, following the CBN monetary policy tightening.
The last interest rate hike booked by the authority to anchor headline inflation condition resulted in adjustment in spot rates pricing at the primary market auctions.
In the just concluded week, traders said in their separate market notes that the treasury bills market experienced bearish bias for most of the week due to limited system liquidity.
The CBN’s mid-week OMO auction resulted in a “no sale” outcome, as investor participation was lackluster as local market expects another round of yield repricing after the committee meeting.
Traders at Cordros Capital Limited told investors in a report that treasury bills secondary market maintained the bearish trend from the prior weeks, as FPIs exited their positions.
The selloffs activities pushed the average yield across all instruments higher, the investment banking firm said in a note obtained, and reviewed by MarketForces Africa.
Across the market segments, analysts explained that the average yield advanced by 156 basis points to 24.9% in the T-bills segment and increased by 6bps to 24.3% in the OMO segment.
“We note that the CBN conducted an OMO auction midweek, which was met with paltry interest following a subscription of N36.00 billion, compared to the N150.00 billion on offer. As a result, the apex bank ended the auction with no sales.”
“We expect the outcome of the MPC meeting scheduled for 22 and 23 July to influence sentiments in the T-bill secondary market. Nonetheless, we do not rule out a likely return of demand in the secondary market supported by the significant amount of liquidity influx expected into the financial system next week”, Cordros Capital Limited told investors in a note. #Interest Rate Sensitive Nigerian T-Bills Yield Spikes to 25%
Market Wrap: Oil Dips over US Election Fear, Chinese Weak Growth
