Pre-Auction Selloffs Drive Yield on Nigerian T-Bills Up 42bps

The average yield on Nigerian Treasury bills increased by 42 basis points due to pre-auction selloffs registered in the secondary market. The apex bank is expected to conduct a primary market auction midweek to refinance maturing bills.

According to analysts’ chat with MarketForces Africa, the latest risk-off sentiment came as market players began to weigh their respective portfolios against an inflation surge. Naira Steadies as Banks Issue Update on FX Purchase

Despite higher interest and inflation rates condition, portfolio returns have been negative. The development has kept foreign investors away from participating in the fixed income market like the record seen before the pandemic outbreak in 2020.

In the money market, short-term interest rates benchmark declined further due to large inflows of funds that bolstered liquidity in the financial system. In its market update, Cordros Capital Limited said the overnight lending rate contracted by 15 basis points to close at 20.9%. The reduction in the fund rate was driven by a total sum of N29.74 billion inflow from FGN bond coupon payments.

As a result, the Nigerian Interbank Borrowing (NIBOR) rates trended lower across all tenor buckets. Notably, the Overnight NIBOR declined by 1.01% to settle at 17.75%, thus reflecting liquidity ease in the financial system, said Cowry Asset Limited in a note. 

Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), nosedived and concluded at 19.79% and 20.85%, respectively. Given these developments, traders reported that activities in the NTB secondary market remained bearish, as the average yield expanded by 31 basis points to 4.2%.

Across the curve, Cordros Capital Limited explained in its note that the average yield was unchanged at the short and mid segments. However, yield expanded at the long (+62bps) end due to selling pressures on the 317-day to maturity (+745bps) bill.  Elsewhere, the average yield was flat at 8.4% in the OMO segment, traders said. #Pre-Auction Selloffs Drive Yield on Nigerian T-Bills Up 42bps