Investors Bet on Naira Assets Ahead of Treasury Bill Auction
Investors increased their bets on naira assets in the financial markets as the Central Bank of Nigeria (CBN) hiked the benchmark interest rate ahead of its primary market auction.
Still, investors took positions in the equities market, which saw about a N105 billion gain, while demand for T-bill also rose in the secondary market due to positive sentiment.
The apex will offer investors N127 billion worth of Nigerian Treasury bills at its main market auction on Wednesday. In the past auction sales, the CBN slashed rates across standard tenor as inflation moderated.
Analysts explained that disinflation boosted real return, thus allowed the CBN to renegotiated spot rates downward. Amidst the interest rate hike, the Treasury bill market ended with bullishness, which dragged the average yield lower by a basis point.
Fixed income market analysts said in their reports that trading activities in the secondary market ended on a mixed note, albeit with a bullish undertone as the average yield pared by 1 bp to 20.7%.
The market witnessed mild selling pressure following the rate hike by the monetary policy committee of the CBN. Across the curve, the average yield contracted at short (-1bp), mid (-1bp) and long (-1bp) segments.
The yield contraction followed buying interests in the 79-day to maturity bills which shed a basis point. At the belly of the curve, yield on 170-day to maturity declined by a basis points die to increased demand from local investors.
Market demand for 345-day to maturity Treasury bills caused its yield to decline by -1bp. Meanwhile, the average yield expanded by 5bps to 23.7% in the OMO bills segment due to selloffs.
“We anticipate a quiet session tomorrow as attention shifts to the NTB auction, where the DMO will offer T-bills worth approximately ₦227 billion”, analysts at AIICO Capital Limited said.
Despite robust liquidity in the money market, the overnight lending rate expanded by 8 bps to 20.9%. The short-term benchmark interest rates have been projected to rise further as the CBN tightens its policy rate. Investors Bet on Naira Assets Ahead of Treasury Bill Auction Naira Rises against US Dollar Ahead of Sept. FX Auction
