Nigerian Treasury Bills Yield Surpassed 25% Ahead of Auction
The average yield on Nigerian Treasury bills surpassed 25% in the secondary market as a tight liquidity balance in the banking system spurred selloffs. Due to the headline inflation rate surge, the negative interest yield on fixed income assets has widened.
After the benchmark interest rate was adjusted to 27.25%, inflation has surged to 33.88%, with the average real return settling at 6.63% from less than 5% during the disinflation period. As investors weighted the new dynamics brought forward by the consumer price index, analysts have projected a further rate hike at the last policy committee meeting in 2024.
The subdued yield in the fixed income market also triggered some portfolio rebalancing efforts. However, investors traded on a mixed note for most of last week. Trading activities leaned towards the bears, with limited activity across the yield curve due to liquidity constraints, TrustBanc Capital Limited told investors in a note.
Analysts notes revealed that proceeding in the fixed income market has been reduced with pocket of transactions on the back of a liquidity deficit in the financial system, which caused the demand for bills to wane.
However, there was notable interest in mid- and long-dated papers, particularly those maturing in April, May, and November 2025. Notably, the 6-Mar and 4-Sep maturities experienced the biggest increase in yield due to selloffs, with yields up by 25 bps and 191 bps, respectively, according to investment firms.
On the other hand, 5-Jun and 9-Oct papers recorded the biggest declines in yield, TrustBanc told investors in a note. Overall, the average benchmark yield advanced by 35 basis points to close at 25.2%, according to Afrinvest Limited, as a result of sell pressures on the mid, belly, and long ends of the curve.
Also, the average yield on OMO bills expanded by 5 basis points to 26.4% due to the activities of sell-side actors seeking to take early profit in the secondary market. In the new week, fixed interest income traders said the subdued system liquidity is expected to undermine demand for instruments in the T-bills secondary market, causing yields to expand.
The Central Bank of Nigeria (CBN) is scheduled to hold a Treasury bills auction on Wednesday to refinance N610.80 billion worth of maturing bills. #Nigerian Treasury Bills Yield Surpassed 25% Ahead of Auction Naira Depreciates Ahead of 2-Week Automated FX Trading Trial
