Selloffs Provoke Sharp Increase in Treasury Bills Yields
Selloffs on Nigerian Treasury bills (NTB) in the secondary market provoked a spike in the average yield amidst uncertainties in the economic environment. Inflation has been projected to climb after the largest naira devaluation witnessed in the financial market.
Market analysts forecast that the monetary authority has no policy luxury to cut the benchmark interest rate in its February meeting despite economic bites on corporate performance.
Ahead of the Central Bank of Nigeria’s (CBN) primary market auction today, there were selloffs on naira assets – the equities market has followed suit in the latest bear runs.
Fund managers and other authorised dealers are positioning for apex bank auction as forecasts show expected demand level will remain strong given robust liquidity in the financial system.
Market data showed that system liquidity improved, forcing short-term benchmark interest rates to decline sharply. The overnight lending rate contracted by 590 basis points to 17.0%, investment firm Cordros Capital Limited said in an update.
Key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN) declined by 6.10% and 5.90% to 16.00% and 17.00%, respectively, according to Cowry Asset Limited. Nigeria Eurobond Slumps after CBN Resumes OMO Auction
The decline in rates came following the inflows from OMO bills maturities worth N25.00 billion. Then, the OMO bill secondary market ended cold as the average yield was flat at 9.6%. Traders reported that activities in the Treasury bills secondary market were bearish, as the average yield expanded by 206 basis points to 11.9%.
Across the curve, the average yield expanded at the short (+53bps), mid (+198bps), and long (+294bps) segments. The uptick was a result of sell pressures on the 79-day to maturity (+128bps), 170-day to maturity (+252bps) and 324-day to maturity (+515bps) bills, respectively.