Nigerian Treasury Bills Yield Surpasses Inflation Ahead of Auction
The average yield on Nigerian Treasury bills fell below 17% as increasing demand for the naira asset extended in the secondary market. The current yield surpassed the inflation rate, widening the real interest rate in the market.
Spot rates are expected to be reduced across the debt market as Nigeria’s disinflation position signals monetary policy easing ahead of the final meeting of the monetary policy authority later in the month.
Investors were seen taking positions ahead of primary market auction where N700 billion worth of Nigerian Treasury bills will be opened for investors’ subscription. Anchored on heightened liquidity in the financial system, a slew of fixed-income market analysts anticipate subscription to be strong.
Investors will give preference for 364-day bills, analysts told MarketForces Africa, a projection anchored on recent past trends in the market. With a slowdown in headline inflation to 16.05%, the market expects significant spot rates repricing at the midweek auction with about 11% real interest rate.
The recently released consumer price index data by the National Bureau of Statistics (NBS) revealed that Nigeria’s inflation continued its deceleration, moderating to 16.05% year on year in October from 18.02% in the prior month.
The sustained disinflation has further made the case for the Central Bank to cut the benchmark interest rate, which printed at 27% versus inflation of 16.05%.
As a result of bullish undertone, the average yield on Nigerian treasury bills at the secondary market declined by two basis points 16.96%, traders said in separate notes.
Across the curve, the average yield contracted at the short (-2 bps), mid (-2 bps), and long (-3 bps) segments, Cordros Capital Limited confirmed in a note.
The yield contraction was driven by the demand for the 80-day-to-maturity bills (-2 bps), 171-day-to-maturity bills (-2 bps), and 353-day-to-maturity bills (-3 bps) bills, respectively. Conversely, the average yield expanded by 4 bps to 21.8% in the OMO segment
