Market Repriced 364-Day Treasury Spot Rate for 7%
Across tenors, the average yields in the fixed income instruments have seen much higher yield repricing after the Central Bank of Nigeria’s (CBN) 150 basis points benchmark interest rate hike.
At the primary market auction (PMA) conducted by the apex bank last week, spot rates were higher at mid and long-tenored Nigerian treasury bills as 364-day rose to 7% due to lower market temperature.
At the auction, the monetary authority allotted a basket of Treasury bills with three different tenors worth N143 billion to refinance the N143.27 billion worth of matured papers. READ: Higher Spot Rates on T-Bills Auction Drive Yields Upward
The auction result shows that the stop rate for the 364-day bill rose to 7.00% (from 6.07%). Also, 91- day bills and 182-day bills increased relatively at 2.75% (from 2.40%) and 4.00% (from 3.79%) respectively.
Last week, in the secondary market, the yield curve inched forward in the Treasury bill segment following the spot rates repricing while investors reacted to inflation worries.
Reacting to a sharp jump in the price level, the market traded in tandem with the bearish sentiment witnessed in the primary market auction amidst rising headline inflation.
Analysts told MarketForces Africa that higher inflation rate reading for June put additional pressures on fixed interest securities investors’ returns; though ongoing yield repricing appears to be positive for investment.
A cold and quiet trading session was also attributed to tepid liquidity in the system. This underpinned another bearish performance that was witnessed in the Treasury bills secondary market last week, traders said in a market report.
Yields on T-Bills and OMO Bills expanded as market participants sold off instruments to generate funds. Thus, the average yield across all instruments expanded by 32 basis points to 7.0%.
Across the segments, Cordros Capital analysts said the average yield increased by 105 basis points and 9 basis points to 7.4% and 6.9% at the OMO and Nigerian Treasury bills segments, respectively.
For the new week, analysts said they expect improved demand for Nigerian Treasury bills on the back of expected inflows to the system and participants’ reaction to the increased yields of bills in the market.
In the OMO space, there was neither maturity nor refinancing hence, reducing financial system liquidity drove the Nigerian Interbank Borrowing Rate (NIBOR) higher for most tenor buckets, according to Cowry Asset note.
This week, the market will see a N10 billion OMO maturity inflow hitting the financial system in addition to a N181.86 billion inflow from FGN Bonds maturities. #Market Repriced 364-Day Treasury Spot Rate for 7%