T-Bills Yield Declines after Unmet Bids at CBN Auction
As investors took lost bids to secondary market, the average yield on Nigerian Treasury bills declined moderately to 18.7% following Central Bank reduce allotment at primary market ahead of inflation figure for February 2024.
The statistics office is expected to release a consumer price index report shortly. By consensus, analysts expect headline inflation to climb further following the latest trend in the forex market.
On Wednesday, the apex bank denied investors an opportunity to ramp up Treasury bills, a reverse from the previous trend which saw an upward rate repricing.
The rejected large chunk of N1.5 trillion staked on Treasury bill sales at the main market on Wednesday. Some analysts said high rates on bills was a deliberate efforts to attract foreign investors into the market.
Investors sought to park huge amounts in Nigerian Treasury bills after rates spiked at the previous auction. However, the apex bank played down bids pushed out by market participants.
At the primary market auction conducted, the Central Bank of Nigeria offered to sell N161 billion across the standard maturities: 91-day, 182-day and 364-day.
Unlike past auctions, both allotment and spot rates were adjusted downward. Demand remained strong, with a N1.497 trillion bid and N161 billion allotment. Stop rates declined across maturities and one year bills was sold at 21.12%, 37 basis points below previous rate.
Decision to lower allotment size was attributed to absence of bids from foreign portfolio investors’ (FPIs) unlike previous experience at the primary market. In the secondary market, trading activities were bullish as lost bids at the midweek auction filtered through the space.
As a result of increase prices of treasury assets, the average yield contracted by 4 basis points to 18.7%. In its market update, Cordros Capital Limited said across the curve, the average yield declined at the short (-11bps), mid (-1bp) and long (-1bp) segments.
The contraction followed raft of demand for the 84 day to maturity whose yield plunged by 62bps, 182 day to maturity saw a basis point decline in yield. Buying interest in 343 day to maturity bills dragged its yield downward by 2bps.
Elsewhere, the average yield pared by 1bp to 18.8% in the OMO bills segment in the secondary market. Meanwhile, proceedings in the FGN bond secondary market were quiet, as the average yield closed flat at 18.3%.
In the money market, short term interest rates benchmark dipped as liquidity concerns eased further. The overnight lending rate contracted by 192bps to 31.1%, following the principal and coupon payments of the maturing FGN MAR 2024 bond worth N 771.11 billion. #T-Bills Yield Declines after Unmet Bids at CBN Auction Naira to Appreciate to N1200 vs US Dollar -Goldman Sachs
