Nigerian Investors Offload T-Bills Holdings after Spot Rates Plunge
Godwin Emefiele, CBN Gov

Nigerian Investors Offload T-Bills Holdings after Spot Rates Plunge

The average yield on Treasury bills spiked following sell pressures in the secondary market after the Central Bank of Nigeria (CBN) sold 64-day bills at 7.30%, down by 119 basis points, at its primary market auction conducted in the week.

At the primary market auction conducted on Wednesday to roll over matured bills as part of an effort to control liquidity in the local economy, spot rates across tenored fell amidst strong subscription levels.

The auction results show a bid-to-cover ratio of 6.83x. Following higher demand seen at the space, the stop rates for the 91-day treasury bills fell to 2.00% from 2.75%. Sales data show that 182-day declined to 4.33% from 7.15%.

A year ago, stop rates on the 91-Day, 182-Day, and 364-Day instruments printed at 2.50%, 3.44%, and 4.90% on January 13 to its 2022 peak of 6.50%, 8.05%, and 14.84% in the latter of the year respectively.

At the end of the auction session on Wednesday, the apex bank offered 7.30% on 364-day bills, a decline from 8.49% on account of a stronger subscription level. Analysts told MarketForces Africa that liquidity level in the market drives yield and spot rates movement – largely.

Banks, and pension fund administrators among other authorise dealers have been bullish in the recent past, locking in funds in naira assets across the fixed interest income market amidst an expectation of higher inflation.

At 21.47%, Nigeria’s galloping headline inflation pressures have eclipsed portfolio or market returns as the yield on short-term instruments continues to nosedive. Based on the liquidity level in the financial system, short-term rates in the money market has fallen to single-digit high and local banks with strong cash bucket demanded higher rates on their funds.

Consequently, the Nigerian interbank offered rate while short-term benchmark rates such as the open repo rate (OPR) and the overnight lending rate (OVN), remained steady at 9.50% and 9.83%, respectively.

Traders at Cordros Capital said in a market report that the financial system liquidity closed at a net long position of N557.32 billion, a decline from more than N1 trillion seen early in the year.

CBN debits on local banks’ cash reserves for failing to meet loan targets impacted the financial system liquidity levels; apart from outflow for Nigerian Treasury bills sales and FX auctions.

In the secondary market for Nigerian Treasury bills, traders at Cowry Asset Management Limited spotted that investors switched to a selling mood on Thursday, particularly on the 23 Nov 2023 T-bills.

Thus, the average yield expanded by 5 basis points to 3.0%. Across the curve, market analysts stated that the average yield was flat at the short and mid segments. >>>Nigerian Treasury Bills Yield Crashed to 3.4%

However, they noted that yield increased at the long (+18bps) end due to selloffs on the 315-day to maturity (+88bps) bill. Elsewhere, the average yield remained at 3.4% in the OMO segment. # Nigerian Investors Sell T-Bills after Spot Rates Plunge