Nigerian Treasury Bills Yield Exceeds OMO Return by 230bps

The average yield on Nigerian Treasury bills trend above OMO yield by more than 200 basis points, according traders as market expects inflation data to further widen real return on investment.

Real rate on investment securities remains negative while market expects inflation data for April to further raise gap between benchmark interest rate (24.75%) and consumer price index (33.20%).

In the secondary market, treasury bills yield settled at 22.40%, Cordros Capital said in its market update while OMO bills printed 20.1%. Foreign investors have started to sell down their naira denominated assets due to negative interest yield amidst elevated global interest rate.

According to analysts, foreign currency inflows drive witnessed in the first quarter of the year was as a results of higher rates the Central Bank of Nigeria was offering to drive FX inflows into the country.

“The flood of hot money have started to leave the country due to high but unimpressive returns on investment portfolios – high spot rates have negative impacts on Nigerian borrowing cotss”, a senior analyst told MarketForces Africa.

In their separate updates, traders reported that activities in the Treasury bills secondary market was mixed with a bullish tilt. The average yield pared by a basis point to close at 22.4% on Tuesday.

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Cordros Capital told investors via email that across the curve, the average yield contracted at the short (-1bp) and mid (-1bp) segments. The yield contractions followed demand for the 23-day to maturity (-2bps) and 177-day to maturity (-1bp) bills, respectively.

Meanwhile, the average yield was unchanged at the long end, according to the investment banking firm.  Elsewhere, the average yield advanced by 9bps to 20.1% in the OMO bills segment in the secondary market.

The market has witnessed risk off sentiment on OMO bills. The CBN latest OMO auction underperformed due to unmet expectations from foreign investors who have reaped higher return from the same instruments in the past. But CBN has started downward repricing as past demand gushed from back to back.

In the money market, there was liquidity pressures. The financial market was confronted with funding pressures, which lifted the benchmark short term interest rate elevated.

For inter-bank rates, open repo and overnight lender rates increased by 83bps and 98bps to close at 29.69% and 30.59%, respectively, accor4ding to data from FMDQ Securities Exchange platform.

Sell pressures in the bond market caused the average yield to expand by 2bps to 18.6%. Across the benchmark curve, the average yield increased at the short (+1bp) and mid (+15bps) segments due to profit-taking activities on the MAR-2025 (+2bps) and APR-2032 (+37bps) bonds, respectively.

Conversely, the average yield declined at the long (-2bps) end driven by interests in the MAR-2050 (-15bps) bond, traders said. Gov. Otti Inaugurates N6.7b 10.98km Road in Rivers

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