Rate on 1year Treasury Bills Declines to 12.55%

Rate on 1year Treasury Bills Declines to 12.55%

Spot rate on 1year Nigerian Treasury bills declined to 12.55% at the primary market auction conducted by the apex bank. According to the auction result, the Central Bank of Nigeria (CBN) crashed spot rates on Treasury bills despite a lower bid ratio at its midweek auction sales.

MarketForces Africa reported apex bank would roll over maturing T-Bills totalling N214.74 billion as part of an effort to manage liquidity in the economy. Detail from the CBN auction result showed that stop rates for the 91-day fell to 4.50%, losing 69 basis points from the previous offer.

Demand came strong but investors bet was lower compared with the level of investment enthusiasm seen in the previous auction. Also, the spot price on 182-day declined to 7%, down by 100 basis points. Long-dated bills or 364-day T-bills dropped to 12.55%, 142 basis points below the spot rate of 13.97% at the previous auction.

Across the tenured, spot rates dropped as CBN eyes reduced balance funding costs despite a lower bid-to-cover ratio of 4.08x, a strong decline from 5.09x reported at the last auction when investors staked N1.54 trillion on bills.

Investment firm Cowry Asset Management said in an update that Nigerian Interbank Offer rate (NIBOR) rates decreased across all maturities, reflecting improved money market conditions.

Notably, the three-month NIBOR rate decreased by 75 basis points to 9.65% from 10.40%. Analysts said, however, that key money market rates rose ahead of debit for the CBN auction sales.

Short-term benchmark or funding rates rose due to strain on financial system liquidity. Data from FMDQ showed that the open repo rate (OPR) rose by 24 basis points to 3.07%

Likewise, the overnight lending rate inched higher by 27 basis points 3.67% while analysts’ estimates showed that liquidity in the market could decline further. 

Trading activities in the Treasury bills secondary market were bearish, as the average yield expanded by 33 basis points to 7.88%. Asset managers said Nigerian Interbank Treasury bills’ True Yield rates rose for most tenor buckets, despite marginal rate decreases at primary market auction. 

Across the curve, investment analysts said the average yield was flat at the short and mid segments but expanded 22 basis points at the long end of the curve. The surge in yield occurred following sell pressures on the 351-day to maturity (+11.68ppts) bill.

Elsewhere, the average yield closed flat at 13.3% in the OMO segment. #Rate on 1year Treasury Bills Declines to 12.55%

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