T-Bills Yield Falls as Market Erases Premium on ‘No Risk’ Investments
Nigerian Treasury bills yield falls 22 basis points on Monday as investors search for catalysts to drive fixed income returns upward as the market moves against paying premium on risk-free investments.
The search for premium on risk-free instruments appears to have failed as fixed income investors would likely earn returns not enough to cover the average inflation rate for the rest of the year, an investment banking analyst told MarketForces.
As long as subscription levels at primary market auction remain robust, fixed income market participants should kiss upward yield repricing a goodbye for 2021, he added but noted that it is only a shock that could raise the average yield on fixed income instruments.
In the money market, the open buy back and overnight rates decline due to improve financial system liquidity, a sustained development seen in August 2021.
Data from FMDQ shows that open buy back declines 183 basis points to settle at 6.50%. Also, the overnight lending rate contracted by 133bps to 7.17%, in the absence of funding pressure.
At the investors and exporters window, the Nigerian local currency, naira appreciated by 0.1% to N411.63 for a dollar but depreciated 0.6% to N527.00 at the parallel market while banks sell for N413.
Today, the Nigerian Treasury Bills secondary market closed with bullish sentiments, as the average yield declined by 22 basis points to 4.7%, according to Codros Capital market report.
Across the benchmark curve, analysts noted that average yield contracted at the mid (-67bps) and long (+20bps) segments following market participants’ demand for the 150DTM (-103bps) and 192DTM (-63bps) bills, respectively; but stayed flat at the short end.
Elsewhere, the average yield at the open market operations (OMO) segment remained unchanged at 6.0%. CBN has maintained distance in the space, keeping supply lower.
In the bond segment, trading activities in the secondary market was bullish as the average yield contracted by 4 basis points to 11.0%.
Across the benchmark curve, average yield contracted at the short (-11bps) and long (-2bps) ends due to investors’ demand for the JAN-2022 (-49bps) and MAR-2036 (-8bps) bonds, respectively; the mid-segment closed flat.
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T-Bills Yield Falls as Market Erases Premium on ‘No Risk’ Investments
