Spot Rate on Long-dated Treasury Bills Rises as Naira Falls
Godwin Emefiele, CBN Governor

Spot Rate on Long-dated Treasury Bills Rises as Naira Falls

Spot rates on the long-dated Nigerian Treasury Bills see rises at a mid-week primary market auction conducted by the Central Bank as naira tumbles across the markets. Nigeria’s local currency, the naira was depreciated 0.2% due to heavier demand for greenback to N415.10 a dollar at the Investors and Exporters window, data from the FMDQ Exchange platform shows.

In the parallel market, the local currency witnessed a rowdy play with traders exchanging naira for N580, N578 and N575 in Lagos, Abuja and Port-Harcourt, according to currencies trading channels check conducted by MarketForces Africa.

Amidst inflation fears slowdown and the ongoing rally in the equity space, the fixed income market was however quiet as investors shifted attention to the primary market auction today.

At the auction, the CBN offered N121.66 billion for sale with a total subscription coming at N493.03 billion. However, rates were in spite of the higher subscription level. Speaking to heavy subscription level seen, some investment analysts said though the real return on invested fund remains negative, it cost money to keep money away from the financial market.

Eventually, the CBN allotted N4.22 billion for the 91-day, N6.95 billion for the 182-day and N176.06 billion for the 364-day bills respectively. Spot rates on 91-day and 182-day bills were steady at 2.50% and 3.50% respectively.

However, the 364-day treasury bills spot rate inched upward to 7.50% from 7.25% at the last auction despite a heavy subscription level seen at the mid-week auction.

As expected, short term rates were faced with pressures. In the money market, the average interbank rate climbed by 250 basis points to 7.75% following 250 basis points increase the Open Buy Back rate and Overnight lending rate to close at 7.50% and 8.00%, respectively.

Cordros Capital analysts in a market report attribute the increase to the absence of significant inflows in the financial system. In the secondary market, trading activity was quiet as market participants’ focus shifted to today’s Treasury bills primary auction. Thus, the average yield stayed flat at 5.3%.

Elsewhere, the average yield at the open market operations (OMO) segment expanded by 2 basis points to 7.7%.  Elsewhere, the average yield at the OMO segment contracted slightly by 2 basis points to 6.5%.

Also, with a bearish bias, activities at the Federal Government of Nigeria (FGN) bond secondary market was quiet in today’s session. As a result, the average yield remained flat yet again to close at 11.35%

Across the benchmark curve, average yield expanded at the long (+2bps) end as investors sold off the MAR-2035 (+12bps) and MAR-2036 (+12bps) bonds; the short and mid segments closed flat.

However, activities at the Eurobond market traded somewhat mixed in today’s session, Alpha Morgan Capital said. In sum, the average yield was slightly down by 1 basis point to close at 6.52%. #Spot Rate on Long-dated Treasury Bills Rises as Naira Falls

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