Nigerian Treasury Bills Yield Eased on Soft Rally
Proceedings in the Treasury bill secondary market were bullish, as the average yield contracted by 11 basis points (bps) to 20.4%. The market experience increased demand for the naira assets as yield-seeking investors continue to put their funds to work.
High yields in addition to a positive real return on investment and disinflation make a good case for local investors strong appetite in the secondary market in the absence of a midweek auction.
Across the curve, the average yield contracted at the short (-1bp) and long (-23bps) ends, investment firm Cordros Capital Limited said in its note. The yield contraction was particularly driven by the demand for the 86-dayto maturity (-1bp) and 198-day to maturity (-78bps) bills, respectively.
However, yield expanded at the mid (+2 bps) segment due to profit-taking activities on the 163-day-to-maturity bill, which saw a +21 bps yield upswing. Similarly, the average yield contracted by 2 bps to 26.6% in the OMO segment.
The T-bills market traded cautiously with selective offers across tenors. However, rates fell 20-30 bps following lower results at the FGN bond auction, driving increased trading activity, traders at AIICO Capital Limited said. Fixed income market analysts expect the same sentiment to extend throughout the week in the absence of fresh market catalysts.
Treasury bills rally is anticipated on the back of strong system liquidity, which is expected to remain positive, driven by anticipated inflows from bond coupon payments, NTB maturity, and FAAC allocation.Analysts said the CBN is also likely to conduct another OMO auction during the week as part of its ongoing liquidity management efforts.
Fixed Income Market Activities Last week
OMO maturities. The Central Bank of Nigeria (CBN) conducted an OMO auction, offering ₦600bn worth of treasury bills to manage excess system liquidity. Demand moderated to ₦1.15tn from ₦1.53tn in the prior auction, resulting in a bid-to-offer ratio of 1.92x and a bid-to-cover ratio of 1.08x following the full allotment of the 155-day bill.
Stop rates for the 155-day bill remained at 24.64%, while that of the 204-day bill declined by 5 bps to 24.59%. Midweek, the DMO also offered Treasury Bills worth ₦162.11bn across the 91-day, 182-day and 364-day tenors. Investor interest improved significantly, with total subscriptions rising to ₦1.23tn, reflecting a bid-to-cover ratio of 7.61x compared to 2.91x at the previous auction.
Total allotments stood at ₦160.02bn, with 51.50% allocated to the 364-day bill. Stop rates declined across the board: the 91-day, 182-day, and 364-day bills closed at 17.80%, 18.35%, and 18.84%, respectively—down by 18 bps, 15 bps, and 51 bps.
In the secondary market, the Treasury bills market saw an easing of average yields on the back of rising demand. The average benchmark yield on Treasury bills fell by 13 bps w/w to close at 20.51%.
The bond market saw strong demand, particularly on the 2033s, which traded around 18.95%/18.80%. Average yields in the bond market declined by 27 bps w/w to close at approximately 18.57%.
Additionally, the Debt Management Office (DMO) published a revised issuance calendar, featuring the reopening of the 2029 bonds and a fresh offer for the 2032s, each with an issuance size of ₦50bn.
The proposed 2030 conventional bond was excluded, likely in consideration of the green bond, which had already been announced. The Green Bond issuance attracted total bids of ₦91.42 billion—an oversubscription of 183% relative to the ₦50 billion target.
The DMO eventually allotted ₦47.36 billion at a coupon of 18.95%, with the issuance recording notable interest from the retail segment.
This week, the market is expected to focus on the FGN bond auction on Monday, with projections that the 2029s will close between 18.50% and 18.75% and strong demand for the newly introduced 2032s, potentially clearing between 18.80% and 19.00%.
The outcome of the auction will likely guide market sentiment for the rest of the week. In the Treasury bills space, a quiet opening is expected, but as market liquidity improves, this could turn bullish.
System liquidity is expected to remain positive, driven by anticipated inflows from bond coupon payments, NTB maturity, and FAAC allocation. In the NTB space, trading may remain subdued initially due to auction activity, but a bullish undertone is expected to persist given improved system liquidity.
The CBN is also likely to conduct another OMO auction during the week as part of its ongoing liquidity management efforts. In the Eurobond space, yields declined by 28 bps to 8.97%, prices as expected, signaling higher demand for local bonds during the week.
“if disinflation continues, demand for bonds will continue to increase, prices for bonds will continue to increase, while bond yields will continue to decline. With continued disinflation, the MPC might be prompted to lower rates”, Coronation Research said in a note
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#Nigerian Treasury Bills Yield Eased on Soft Rally
