T-Bills Yield Down after Spot Rate Long-dated Falls
Nigerian Treasury Bills

T-Bills Yield Down after Spot Rate Long-dated Falls

The average yield on Nigerian Treasury bills has declined below 11% a day after the Central Bank of Nigeria (CBN) priced spot on 364-day bills 51 basis points lower at the primary market auction conducted midweek.

The CBN auction result showed that stop rates for the 364-day bill fell to 13.99% (from 14.50%), while those for the 90-day and 180-day bills remain sticky.

The apex bank rollover maturing bills on Wednesday as part of efforts to manage funds flow in the economy. After interest rate hikes, the fixed income space has seen new pricing dynamics which pushed money rates upward across the market.

Reacting to the downward spot pricing, investors in the secondary market upturn their investing belly with strong positioning into the mid and long-dated treasury instruments in the secondary market on Thursday amidst relatively robust liquidity in the financial system.

Short-term rates remained steady while traders and other market analysts said cash-rich local banks with strong liquidity positions demanded lower rates as the Nigerian Interbank offer rate declined.

Trading data from FMDQ Exchange indicates that the Open Buyback Rate (OPR) and the Overnight Lending Rate (OVN) remained unchanged at 8.50%, and 8.83%, respectively in the absence of funding pressures.

In its market report, Cordros Capital analysts said the financial system liquidity settled at a net long position of N306.56 billion on Thursday – a day after the primary market auction conducted by the CBN.

Thus, trading activities in the Treasury bills secondary market closed bullish, as the average yield declined by 16 basis points to 10.8%. The decline was attributed to demand pressure in the 11 May 2023 T-bill which tumbled by 257 basis points.

Meanwhile, across the curve, traders said the average yield was flat at the short and mid segments but contracted at the long (-39bps) end following interests in the 182-day to maturity (-257bps) bills.

Elsewhere, analysts said in their separate notes that the average yield was flat at 10.2% in the CBN open market operations (OMO) bills segment after a marginal decline reported previously. READ: FX Inflows into Nigeria Rise in August – Report

Also, trading in the FGN bond secondary market was bullish, as the average yield contracted by 15 basis points to 14.4% – following an improved market sentiment after inflation pressures in the United States’ slowdown.

Across the benchmark curve, the average yield declined at the short (-42bps) end as investors demanded the APR-2023 (-218bps) bond but contracted at the mid and long segments. # T-Bills Yield Down after Spot Rate Long-dated Falls