Nigerian T-Bills Yield Slumps to 4.3%
The average yield on Nigerian Treasury bills (NTB) went southward midweek as bullish momentum in the secondary market accelerates – with inflation and interest rates staying in double-digit high region.
According to fixed income traders, the bills-buying moment in the secondary market came at the time when the market began to grapple with liquidity tightness that has pushed funding rates to double-digit.
Short-term benchmark rates – open repo and overnight lending rates had played at single-digit lower for a long time before it started making an uptrend after liquidity dryness in the money market.
The open repo rate (OPR) and the overnight lending rate (OVN) witnessed a substantial increase, hitting double-digit levels at 11.25% (up from 2.71%) and 12.30% (up from 3.42%), respectively.
Market analysts said the overnight lending rate expanded significantly by 888 basis points to 12.3%, following the settlement of the FGN bond primary market auction on Monday worth N657.84 billion. As a result, the financial system liquidity closed negative at ₦121.86 billion from ₦412.59 billion
Consequently, trading activities in the Nigerian Treasury bills secondary market turned bullish, as the average yield contracted by 191 basis points to 4.3%. >>> Nigerian Treasury Bills Yield Rises to 7%
In its market update, Cordros Capital said across the curve, the average yield declined at the short (-329bps), mid (-218bps), and long (-148bps) segments.
The yield slowdown came following record demand for the 36 days to maturity (-381bps), 141 days to maturity (-222bps), and 239 days to maturity (-255bps) bills, respectively.
To put it straight, investors buying interest in 36 days to maturity bills drag its associated yield line down by 381 basis points. The same development was sighted on 141-days-to-maturity bills causing the yield curve associated with the tenor to decline by 222 basis points. Yield on 239 days to maturity bills dropped by 255 basis points.
Cowry Asset Management told investors in its market update that tightened liquidity conditions resulted in an upward movement of the Nigeria Inter-Bank Offered Rate (NIBOR) across most tenor buckets. #Nigerian T-Bills Yield Slumps to 4.3%