T-Bills Spikes to 7.12% as Market Weighs Rate Hike

T-Bills Spikes to 7.12% as Market Weighs Rate Hike

The average yield on Nigerian Treasury bills rose sharply by 281 basis points Thursday following selloffs in the short, belly, and long-dated instruments. The bearish bias came as the market weighed the net effects of the recent interest rate hike by the monetary authority on their portfolios.

The Nigerian Treasury Bills’ buying had intensified in the secondary market with support from sizeable liquidity in the financial system.  The inflation rate has already eclipsed the upside as real return on investment in the fixed income market remains negative across risk-free government borrowing instruments.

Even with negative interest yield, demand for Nigerian Treasury bills issued by the apex bank has been strong, a development that allowed the Central bank to crash spot rates to single-digit low despite a rising inflation trend.

Though the liquidity level remained robust yesterday in the market, there were exit trades across tenure as the market continues to search for catalysts that will propel yield repricing.

A spike seen in the financial system liquidity was a result of about N600 billion inflows from FAAC. In its market update, Futureview Financial Services Limited revealed that system liquidity increased to ₦441.72 billion on Thursday from ₦290.94 billion record midweek.

In the absence of funding pressures, the open repo rate (OPR) and the overnight lending rate (OVN) both plummeted to 0.90% and 1.30%, respectively, data from FMDQ Exchange platform check by MarketForces Africa showed.

The bearish trend in the secondary market caused the average yield to expand by 281 basis points to 7.1%.  In its market update, Cordros Capital Limited said across the curve, the average yield advanced at the short (+179bps), mid (+234bps), and long (+334bps) segments.

The upward yield trend came following profit-taking on the 91-day to-maturity (+204bps), 182 days to maturity (+268bps) and 336 days to maturity (+422bps) bills, respectively.

The true yield jumped higher as a result of sell pressures from traders seeking higher yields.  On Wednesday, the treasury bills market traded cold as investor shifted their attention towards the CBN primary market auction. 

The apex bank auction result showed allotment of N264.31 billion out of the total subscription of N398.15 billion. #T-Bills Spikes to 7.12% as Market Weighs Rate Hike Nigerian Treasury Bills Yield Rises to 7%