Nigerian Treasury Bills Yield Dips to 17%
The average yield on Nigerian Treasury bills declined slightly due to sustained demand for the naira in the secondary market. The changing market dynamics continue to fuel rate cut expectations.
Hence, investors have been increasing bets on Treasury bills paper despite huge auction sales. Banks are taking positions, analysts told MarketForces Africa, as the need to boost earnings via interest yield assets becomes necessary.
The significant rally on Treasury bill papers was also enhanced due to excess liquidity in the financial system. Fixed-income market analysts anticipate the yield on Nigerian Treasury bills to reduce through the fourth quarter of the year as disinflation and a firmer naira increase interest in short-term investment securities.
Last week, bullish sentiment persisted in the Treasury bills market, supported by robust system liquidity and heightened expectations of a rate cut following October’s inflation print of 16.05% y/y, down from 18.02% in September.
Consequently, the average yield across all instruments declined by 23 basis points week on week to 19.1%, according to Cordros Capital Limited. Fixed-income market analysts said by segment, Nigerian Treasury bills yields decreased by 3 bps to 17.0%, while OMO yields closed lower by 26 bps to 21.5%.
The Central Bank of Nigeria (CBN) offered N700.00 billion worth of bills at the primary market auction conducted last week. The offer size was split into N100.00 billion for the 91 days bills, N150.00 billion for the 182 days bills, and N450.00 billion for the 364 days tenor.
Auction results revealed that investor appetite remained strong, with aggregate subscriptions reaching N1.29 trillion, significantly overshooting the offer.
Eventually, the CBN sold N1.09 trillion at stop rates of 15.30% (unchanged), 15.50% (unchanged), and 16.04% (unchanged), indicating sustained demand and market confidence at prevailing rates.
MarketForces Africa reported that the CBN floated an OMO auction on Tuesday, offering N600.00 billion across the 173 days and 182 days tenors.
Total subscription settled at N3.77 trillion, with N2.98 trillion eventually allotted, translating to a Bid-to-cover ratio of 1.3x. OMO bills with 173 days to maturity was priced at 20.54% while 182 days to maturity was sold at the rate of 20.55%.
The CBN conducted another OMO auction the following day (Wednesday), offering N600.00 billion across the 174 days and 188 days papers, allotting N903.35 billion at stop rates of 20.45% and 20.54%, respectively.
“We expect next week’s market dynamics to be shaped by the outcome of the MPC meeting scheduled for November 24 – 25. At the meeting, we anticipate a further 100bps reduction in the MPR, bringing it to 26.0%2, Cordros Capital told investors in a note.
Analysts at Cowry Asset Limited said liquidity is poised to remain modestly positive, supported by an OMO maturity of N489.37 million and FGN bond coupon inflows totalling N15 billion.
The treasury bills market, however, may open on a mildly bearish note as investors adjust to the yield adjustments seen last week, particularly in the absence of any scheduled primary market supply.
With month-end approaching, portfolio managers may become more active in the mid-segment of the curve, especially in March and April maturities, as they rebalance for liquidity needs tied to cyclical cash demands The Initiates Rally Amidst Dual Capital Raising Offers
