Market Demand for Treasury, OMO Bills Drag Yields Lower
The average yield on Nigerian Treasury bills and Open Market Open (OMO) bills shrank slightly in the secondary market as liquidity pressures jerked up short-term benchmark interest rates in the money market yesterday.
Fixed income investors in the space continue to swing along with changing market dynamics. Double-digit high interest has failed to curb Nigeria’s rising inflation rate along with a sustained decline in the value of the Naira.
Bonds auction sales failed to perform yesterday as local investors shied away from naira assets with undercurrent rates. Nigeria is a strong double-digit interest rate environment, given the current inflation trajectory, which is at a 27-year high, and the need to enhance carry-trade to stimulate the return of foreign investors, CardinalStone Partners said in a commentary note.
In the secondary market, investors parked funds into Treasury bills. As a result of demand, the average yield declined by a basis point to 15.44%. In its market update, Cordros Capital Limited said across the curve, the average yield closed flat at the short end but pared at the mid (-1bp) and long (-1bp) segments.
This was due to demand for the 170 day to maturity (-1bp) and 352 day to maturity (-1bp) bills, respectively. Similarly, the average yield contracted by 1bp to 17.8% in the OMO bills segment in the secondary market.
In the money market, short-term benchmark interest rates surged strongly due to tight liquidity. The overnight lending rate expanded by 644 basis points to close the day at 23.9% on account of a dearth of significant inflows from maturing instruments to saturate funding levels.
In the same vein, the open repo rate jumped to 23.01% from 16.71%, data from the FMDQ platform showed. #Market Demand for Treasury, OMO Bills Drag Yields Lower Court Orders FCMB to Deposit N540m Defamation Damage Awarded to Prophet Omale
