Nigerian Treasury Bills Yield Falls Sharply to 1.47%

Nigerian Treasury Bills Yield Falls Sharply to 1.47%

With strong funds allocation into Nigerian Treasury Bills by investors, the average yield on instruments has continued a downward trend, now nearing the minimum point as recent interest rate hikes appear to have failed as a catalyst for yield repricing.

Healthy funds flow in the financial system has been fingered as a key driver of declining yield, though recent data shows that the liquidity level has moderated. At the primary market auctions conducted by the Central Bank of Nigeria, spot rates have been declining as a result of higher demand for bills.

Nigerian banks hold substantial sovereign fixed-income securities, primarily in the form of T-Bills, FGN bonds, Open Market Operation (OMO) bills and Special Bills. Fixed interest income yields have been extremely low since December 2019, when the CBN precluded non-bank financial institutions from investing in OMOs.

This action caused a flood of liquidity to enter the government fixed-income securities market, particularly T-Bills, and a collapse in yields. Though the apex bank tightened access to the discount window, the market has remained bullish since the latter part of 2022 amidst a dearth of alternative investment options even as returns on naira assets are exposed to Nigeria’s double digits inflation rate.

Today, the average yield in the secondary market tumbled by more than half to 1.47% following sustained its buying momentum across the tenored bills traded in the local debt capital market.

In the money market, the overnight lending rate expanded by 17 basis points to 11.0% due to funding pressure on the system.

The decline was supported by bullish trading activities in the Treasury bills secondary market, which pushed the average yield contracted by 191 basis points today after a large drop in CBN spot rates.

Across the curve, traders said the average yield declined at the short (-70bps), mid (-184bps), and long (-337bps) segments following demand for the 91-day to maturity (-134bps), 133-day to maturity (-209bps) and 273-day to maturity (-431bps) bills, respectively.

Elsewhere, the average yield was flat at 2.9% in the open market operations (OMO bills) segment.  Most market analysts however remain optimistic that yield will make a fresh rise over an expectation that buying momentum will decline with changes in macroeconomic key indicators. # Nigerian Treasury Bills Yield Falls Sharply to 1.47%

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