Nigerian Treasury Bills Yield Climbs Ahead of Interest Rate Decision
The mood on Nigerian Treasury bills continues to swing after investors spotted that the central bank has continued to slash rates at its main auctions. The yield surged come ahead of the Central Bank of Nigeria (CBN) policy committee decision on benchmark interest rate on Tuesday. In the absence of any surprise, analysts expect the monetary authority to keep the interest rate unchanged.
Due to selloffs across the short, belly and the longer end of the curve in the Treasury bills secondary market, the average yield rose by 8 basis points to 19.52%, according to AIICO Capital Limited. In contrast, the average yield expanded by 19 basis points to 23.6% in the OMO bills segment. Investors have been raising bets on the naira assets due to elevated yield on the fixed interest securities instruments.
According to analysts, the slowdown in the inflation rate has helped push the real return on investment in government borrowing instruments higher. Even though interest yield remains negative, the gap has narrowed amidst expectation that the central bank will likely keep the benchmark interest rate at 26.75% this week.
The real return on investment has reduced to 6.4% as inflation (33.15%) continues to reduce month on month versus the interest rate benchmark (26.75%). But the disinflation has nudged the apex bank to reduce spot rates across standard maturities in the past Treasury bills auction sales.
Analysts expect the authority to maintain rate slicing, especially at the long end of the curve amidst fluctuating liquidity in the financial system. Fixed income market analysts anticipate a quiet showing tomorrow as participants await the outcome of the MPC meeting. #Nigerian Treasury Bills Yield Climbs Ahead of Interest Rate Decision CBN Defends Naira with $39m in Forex Market
