T-Bill Selloffs Lift Yield to 25.2% after Auction Rate Cut
The average yield on the Nigerian Treasury Bill crossed 25% in the secondary market after rate adjustment. The primary market auction conducted last week saw mixed spot rates repricing across standard maturities.
The market spot rates on Treasury bill sold to investors followed additional interest rate hike at the recently concluded policy committee meeting of the Central Bank. The auction results triggered selling rallies in the secondary market as investors started to dump naira assets amidst high inflation and interest rate tightening.
Confirming the impact of changing market dynamics, traders informed investors that the market repriced yields higher following the 50bps hike in the benchmark interest rate. As a result, the average yield across all instruments expanded by 45 basis points o 25.1%, according to Cordros Capital Limited.
The investment banking firm said across the market segments, the average yield increased by 34bps to 25.2% in the T-bills segment and rose by 64bps to 25.0% in the OMO segment. At the Treasury bill auction, the DMO offered N277.96 billion across three tenors.
The amount was split into N16.48 billion for the 91- day bills. At the belly of the curve, the authority offered N6.44 billion 182-day Treasury instruments to investors and N255.04 billion for the 364-day bills – worth of instruments to investors.
Investment banking firms said their separate reports that aggregate subscription settled slightly higher at N373.95 billion compared with N308.66 billion total demand in the previous auction with a bid-to-offer of 1.3x.
The auction closed with the DMO allotting exactly what was offered, Cordros Capital Limited said. The Nigerian Treasury Bill for 91-days was sold at a stop rate of 18.50%, up from 16.33% at the previous auction sales.
At the belly of the curve, the authority offered 182-day Treasury bill at 19.50% versus 17.44% offered to investors at the previous auction. However, rate one year instruments went down to 22.10%, 14 basis points below 21.24% offered at the previous auction.
“We anticipate that the liquidity surplus in the system next week will likely drive demand for instruments, causing a decline in yields in the secondary market,” Cordros Capital Limited told investors in an email note. #T-Bill Selloffs Lift Yield to 25.2% after Auction Rate Cut Fidelity Bank to Accept Oversubscriptions, Creates Additional 8.2bn Shares
