Liquidity: Nigerian Banks Trim Investment in Nigerian Bills
The average yield on Nigerian Treasury bills climbed by 24 basis points as flexible market dynamics, and liquidity pressure in the financial system triggered naira asset selloffs.
In the secondary market, sell side actors remained active on Thursday, with profit taking activities witnessed across the short, belly, and long ends of the curve. Some fixed income experts told MarketForces Africa the sustained selloffs were a result of a tight liquidity level in the financial system.
The funding system has remained tight, and banks that have investment securities were noted to be major sellers in the market. The overnight lending rate expanded by 27 bps to 31.8% in the absence of any significant funding inflows into the financial system.
After the Central Bank of Nigeria (CBN) lifted the suspension on banks from accessing funds from standing lending facility, rates have been higher. Local banks have been weighing the option getting funding from the CBN at more than 31% and selling their short term investment securities to boost their respective liquidity profiles.
The average yield expanded by 24 basis points to 20.7%, fixed interest securities analysts at Cordros Capital Limited said in an email note. Analysts stated also that yield adjusted across the curve due to selloffs on the naira asset.
The average yield increased by 45 basis points at the short because investors dumped Nigerian Treasury bills with 77 days to maturity.
At the belly of the curve, yield climbed by +42 bps as investors and other market participants offloaded Nigerian Treasury bills that have 112 days to mature. The decision to take profit on the Nigerian Treasury bill that has 189 days to mature shifted the yield at the long end higher by +2 bps.
Traders specifically stated that profit-taking activities on the 77 days to maturity caused its yield to climb by +181bps. Selloff on 112 days to maturity dragged its yield higher by +173bps and 189-day to maturity bills also gained +42bps.
Similarly, the average yield expanded by 14 basis points to 23.9% in the OMO bills segment in the secondary market. #Liquidity: Nigerian Banks Trim Investment in Nigerian Bills CBN Defends Naira with $39m in Forex Market
