T-Bills Steadies as FGN Bond Yield Hits 12.25%
Patience Oniha, DMO Director General

T-Bills Steadies as FGN Bond Yield Hits 12.25%

The Nigerian Treasury bills market traded cold again on Thursday partly as a result of weak liquidity in the financial system. However, sell pressures on FGN bonds in the secondary market drive yield upward to 12.25%.

The thin transaction was spotted on treasury instruments as a strain in the liquidity position continues to impact trading activities on the financial instrument. Consequently, short-term money market rates have adjusted upward – staying in the double-digit region over weeks.

In a market note, traders at Alpha Morgan Capital noted that the average interbank rate expanded by nine basis points to close at 14.84% on Thursday. This was a resultant effect of an increase in the open buy back and flattish overnight lending rate movement. Data from FMDQ Exchange shows that the open buy back rate indeed inched upward by seventeen basis points to 14.67%.

Meanwhile, the overnight rate remained flat to close at 15.00% on account of low maturities inflows into the market as system liquidity closed in a short position at N19.59 billion, according to a market note from Cordros Capital.

In the secondary market for trading open market operation (OMO) bills, the average yield expanded by 38 basis points to 10.0% in the segment. MarketForces Africa reported that OMO bills spot prices across tenored have seen a spike following two consecutive periods of interest rate by the monetary policy authority.

Due to a quiet session in the secondary market for the Nigerian Treasury bills, the average rate retained its previous position at 7.52%. Though, Alpha Morgan Capital said in a note that the market was quiet with mild activities seen on the November paper.

In the bond market, trading activities on the FGN bond instruments were however bearish as traders said they witnessed a pocket of transactions on the 2035s and 2050s maturities. As a result of the sell pressures in the secondary market for government bonds, the average yield inched upward up by two basis points to close at 12.25%.

Across the benchmark curve, traders said the average yield expanded at the short (+5bps) end as investors sold off the MAR-2024 (+21bps) bond. So, the average yield closed flat at the mid and long segments. READ: Treasury Yield Steadies as Fixed Income Market Keeps Low Rates

The FGN Eurobond space saw a resurgence of buy-side interests following economic data in the US that surpassed consensus as well as steady oil prices. Thus, the average rate was down by 28bps to close at 12.26%. # T-Bills Steadies as FGN Bond Yield Hits 12.25%