Risk Conscious Investors Pump Funds into Treasury Bills
The average yield on Nigerian Treasury bills steadied in the secondary market as investors shifted attention to primary market auction sales. Despite the auction sales, there were records of buying interest across the short, belly and end of the curve in the secondary market.
Lost bids at the auction appeared to filter through the secondary market as investors continue to seek alpha across the Nigerian financial markets amidst damaging inflation conditions. Increased financial system liquidity, which was bolstered by inflows from mature instruments and banks continuing to borrow from the central bank’s standing lending facility, helped to fuel the market’s avalanche of demand for naira assets.
The short term benchmark interest rates declined, suggesting that liquidity pressures experienced in the recent past eased. On the other hand, the interbank borrowing rate saw a significant uptick of 118 percentage points, reaching 32.14%, Cowry Asset Limited said in its note.
Key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN), also witnessed southward shifts to 29.94% and 30.66%, as the demand for funds eased. The secondary market for Nigerian Treasury bills, according to fixed interest securities analysts, was bullish and reasonably active, with buy sentiments predominating across the curve.
Cordros Capital Limited stated specifically in its note to investors that the average yield declined in the short (-1bp), mid (-1bp) and long (-1bp) segments. The contraction followed demand for the 50 day maturity, whose yield dropped by -2bps.
There was buying interest on 169-day to maturity, causing its yield to pare by a basis point. At the end of the curve, investors parked cash into 337-day to maturity, dragging its yield down by 2 basis points. Similarly, the average yield contracted by 1bp to 20.9% in the OMO bills segment in the secondary market, traders said in the note.
Overall, the average yield on T-bills decreased by one basis point to 20.91% due to the buying momentum. Elsewhere, yield remained subdued in the secondary market. Trading activity on the Federal Government of Nigeria (FGN) bond ended on a calm note as the real return on assets widened.
Investors divested from the MAR-25 and MAY-33 bonds, resulting in their yields rising by 2 basis points each. Despite this, the average secondary market yield remained unchanged from the previous day’s close of 18.69%. #Risk Conscious Investors Pump Funds into Treasury Bills
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