Nigerian Treasury Bills Yield Rises as Discount Rates Increase
The average yield on Nigerian Treasury bills spiked as investors reacted to the rate hike with profit taking activities in the secondary market. Sell side activities were witnessed across the Nigerian Treasury bill tenors as investors began to seek higher returns on naira assets on the back of high interest, and an inflation rate environment.
The average yield across all instruments expanded by 45 basis points to 25.1%, Cordros Capital Limited said in its market update. Traders also noted that across the market segments, the average yield increased by 34 basis points to 25.2% in the Nigerian Treasury bills segment.
A similar selloff pattern in the OMO bills segment lifted the average yield higher by 64 basis points to close the week at 25.0%. Last week, the apex bank conducted a primary market auction for Treasury and OMO bills despite tight liquidity conditions in the financial markets.
At the Treasury bills auction, the Central Bank offered N227.54 billion across standard maturities to investors for subscription last week. The offer was split into N28.15 billion for the 91-day, N25.58 billion for the 182-day, and N173.81 billion for the 364-day bills, according to auction details
Analysts said aggregate subscription settled lower at N304.27 billion versus N563.17 billion demanded level seen in the previous auction, with a bid-to-offer of 1.3x. The CBN allocated exactly what was offered across standard maturities to investors. The spot rate on 91-day Treasury bills was priced higher to 17%, from 16.63%.
Auction results also showed that spot rate on 182-day bills was priced at 17.50%, up from 17.00% at the previous auction. One year Treasury bills was sold at spot rate of 20.00%, up from 18.59%.
Meanwhile, the CBN also conducted an OMO auction on Thursday, offering instruments worth N500.00 billion. The OMO auction was split across standard maturities as N75.00 billion for the 96-day, N75.00 billion for the 194-day, and N350.00 billion for the 362-day—to investors.
Details from the auction results showed that total subscription settled at N252.90 billion for the 362-day, while no demand was seen for the 96-day and 194-day tenors. Naira Rises against US Dollar Ahead of Sept. FX Auction
Eventually, the Central Bank allotted exactly the size of its offer to investors who sought to bet at a stop rate of 24.36%, up from 21.80%. #Nigerian Treasury Bills Yield Rises as Discount Rates Increase
