T-Bills Trades Cold, Selloff Hits FGN Bond as Naira Gain
Ahead of the Central Bank of Nigeria (CBN) primary market auction schedule for the midweek, the average yield on Nigerian Treasury bills was steady today as fixed interest securities traders continue to hibernate amidst uncertainties in the market.
Headline inflation rate slowdown in January three basis points to 15.60 per cent, according to National Bureau of Statistics after moderate surge witnessed in December 2021. The decline in consumer price index reduces pressure on fixed income market investors’ real return but there is also spot rate repricing downward at the Central Bank of Nigeria Treasury bills auctions.
Today, the Nigerian local currency, Naira, appreciated by 0.16 percent as the dollar was quoted at ₦416.00 as against the last close of ₦416.67 at the Investors and Exporters’ foreign exchange (FX) window. Traders said market participants in the space maintained bids between ₦410.00 and ₦444.00 per dollar.
However, in the bond space, there was a record selloff that plunged average yields downward on Tuesday. According to analysts, Treasury bills auction spot rates were price down following a relatively high subscription level driven by the availability of free cash in the system.
In the money market, short term rates dropped off some basis points again in the absence of funding pressures, the average interbank rate declined to a single-digit low as both open buy back and overnight lending rates dipped.
With N227.20 billion open market operation (OMO Bills) repayment, liquidity in the financial system is expected to keep money market rates lower up till Friday when there will be outflow for FX auction and net off for Treasury bills auction.
According to data tracked on the FMDQ Exchange platform, the overnight lending rate decreased by 633 basis points to close at 6.33 percent as against the last close of 12.66 percent. Also, the open buy back rate declined by 600 basis points to close at 6.00 per cent compared to 12.00 per cent on the previous day.
In a commentary note, FSDH said with the OMO repayment, the money market rates are likely to remain subdued, barring any mop-up activity by the Central Bank of Nigeria.
Trading activities at the Nigerian Treasury Bills secondary market closed on a flat note with average yield across the curve remaining unchanged at 4.18 per cent as traders hibernate ahead of CBN auction.
Average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.39 per cent, 4.24 per cent, and 4.92 per cent, respectively, FSDH Capital said in a note today.
The CBN is scheduled to conduct a Primary Market Auction to roll over Nigerian Treasury bills maturities worth ₦115.28 billion across 91-day (₦2.04 billion), 182-day (₦22.86 billion), and 364-day (₦90.38 billion) tenors.
In the OMO bills market, the average yield across the curve closed flat at 5.27 per cent, according to traders’ notes. Average yields across short-term and long-term maturities remained unchanged at 5.41 per cent and 5.20 per cent, respectively.
FGN bonds secondary market closed on a positive note today, as the average bond yield across the curve cleared lower by 13 basis points to close at 10.96 per cent from 11.09 per cent on the previous day.
Average yields across medium tenor and long tenor of the curve declined by 38 basis points and 16 basis points, respectively. However, the average yield across the short tenor of the curve expanded by 13 basis points.
The 23-FEB-2028 maturity bond was the best performer with a decrease in the yield of 42 bps, according to FSDH Capital while the 23-MAR-2025 maturity bond was the worst performer with an increase in the yield of 42 basis points.
Furthermore, analysts at FSDH Capital predicted that the secondary bond market may witness an uptick in trading activities in the short term due to improved system liquidity. #T-Bills Trades Cold, Selloff Hits FGN Bond as Naira Gain
Read: Bonds, OMO, T-Bills Yields Steady as Market Trades Cold
