Nigerian Treasury Bills Yield, OMO Slump over Rally
With solid investable funds, the average yield on Nigerian Treasury bills (NTB) continues to decline amidst a sustained rally in the secondary market, according to market data despite Moody’s downgrade and S&P shift to a negative outlook for Nigeria.
Last week, the Central Bank of Nigeria (CBN) was not in the market to sell Nigerian Treasury bills as there were no matured bills in focus. However, the apex bank will conduct a primary market auction to roll over maturing bills in the new week.
The absence of auction sales pushed market participants which sought to lock in funds in the secondary space to position across tenored bills in the secondary market.
The fixed income market has maintained a rally in the bills segment amidst naira assets exposures to inflation rate. Traders said buy-side activity was seen particularly on T-bills due on June 8, 2023, and December 7, 2023, and January 11, 2024, at 1.10%, 1.70%, and 2.20%.
The level of demand seen was spurred by robust liquidity in the financial system which continues to trigger bullish sentiments in the Treasury bills secondary market. As a result, the average yield across all instruments dipped by 8 basis points to 1.7%.
At the same time, market recorded a healthy demand for OMO bills, thus dragging yields lower. Across the market segments, the average yield contracted by 89 basis points to 2.0% in the open market operation (OMO bills) segment.
This week, the CBN expected to conduct primary market to roll over maturities worth NG217.06 billion. In a market brief, Cordros capital analysts said they believe yields for T-bills will increase slightly in the secondary market following the anticipated liquidity squeeze next week.
In the money market, the overnight lending rate expanded by 6 basis points week on week to 11.1%, as the outflows for the FGN bond auction and late CRR debit pressured the system liquidity.
The financial system was down by N662.62 billion for the FGN bond auction amid N400 billion inflow of redesigned naira notes from the apex bank of the nation, according to Cordros Capital.
Analysts stated that the average system liquidity settled at a net long position of N728.11 billion as against a net long position of N837.61 billion in the previous week.
Next week, system liquidity will be supported by the inflow of OMO maturities of about N40.00 billion. However, analysts said they expect the overnight rate to trend upwards, saying CBN will most likely mop up the excess liquidity from the system.# Nigerian Treasury Bills Yield, OMO Slump to 2%
