Naira Appreciates as T-Bills Exposures to Inflation Widens
The Nigerian naira appreciates to N461.70 amidst gloomy predictions for exchange rate devaluation in 2023. Money risk in Nigeria has widened as both the inflation and interest rates move in a similar direction.
The average yield on Nigerian Treasury bills declined two basis points to 3.4% midweek as investors ramp up more securities in the market despite exposure to a higher inflation print of 21.34% in December, 2022.
While the recent 100 basis points benchmark interest rate hike provides investors reason to demand higher spot rates, liquidity level still remains a downside.
Based on fixed income analysts’ consensus, the market is expecting yield repricing as Nigeria plans to ramp up borrowings to support deficit budget in 2023.
Investors buying instruments with short term duration signals weak optimism amidst uncertainties in the economy in the year. The yield on Nigerian Treasury bills had printed at 11% in the latter part of 2022 before a bullish trend started forming amidst rising liquidity in the financial system.
In the money market, the interbank rates inched upward due to strain in the financial system. Data from FMDQ Exchange show that the overnight lending rate expanded by 66 basis points to 10.8%.
In a market brief, Cordros Capital told customers via email that Activities in the Nigerian Treasury bills secondary market were mixed, although with a bullish tilt, as the average yield dipped by 2bps to 3.4%.
Across the curve, traders said the average yield declined at the short (-4bps) end due to demand for the 29-day to maturity (-30bps) bill, but remained flat at the mid and long segments.
Similarly, the average yield was unchanged at 2.9% in the OMO segment. Traders also stated that Trading in the Treasury bonds secondary market was mixed, albeit with a bullish bias, as the average yield pared by 1bp to 13.2%.
Across the benchmark curve, the average yield dipped at the short (-1bp) end following buying interest in the MAR-2025 (-17bps) bond. Meanwhile, the average yield closed flat at the mid and long segments, Cordros Capital stated. #Naira Appreciates as T-Bills Exposures to Inflation Widens