T-Bills Yield Gyrates as Demand for Long-Dated Securities Rise
The average yield on fixed income instruments continues to gyrate as demand for long-dated Nigerian Treasury Bills rises amidst expected moderation in headline inflation rate for September 2021.
After a five months consecutive decline, some analysts have restated the expectation that Nigeria’s inflation rate would see another drop ahead of data released by the National Bureau of Statistics.
Nigeria’s headline inflation rate has galloped for 19 months straight before it retreated in April 2021 for the first time and has maintained a downward trend since then, printed at 17.01% in August.
Despite the double-digit inflation worries, investors in the fixed income market continue to record negative real returns on investment as the Debt Management Office (DMO) continues to price down offered rates.
While funds seek better returns, low fixed interest securities issuance has kept demand-side weak, but it appears that fund has started flowing into equity space following a 5-day rally.
In the money market, interbank rates have maintained a downward trajectory due to what analysts call the absence of significant pressures. Short term rates had slowed down to a single-digit, one of the lowest levels seen in the second half of 2021.
However, data from the FMDQ platform shows a reversal as open buy back (OBB) sees a 133 basis points increase to 7.50% on Wednesday. Also, the overnight lending rate expanded a little low as expected by 92 basis points to 7.8%, in the absence of significant inflows in the system, according to analysts at Cordros Capital report.
Analysts said in the report sent to clients that trading in the Nigerian treasury bills secondary market was mixed, albeit with bullish bias, as the average yield contracted by 3 basis points to 5.1%.
Across the benchmark curve, analysts see the average yield flattish at the short and mid segments but contracted at the long (-6bps) end due to demand for the 309 day to maturity (-33bps) bill.
Elsewhere, it was noted that the average yield at the open market operations (OMO) segment advanced by 7 basis points to 6.4%. For the federal government bond segment, trading activities in the secondary market was also mixed with a bearish tilt, as the average yield expanded by 4 basis points to 11.1%.
Read Also: Bond Rate Slides as Investors Go For Long-Dated Instruments
Analysts said across the benchmark curve, the average yield expanded at the short (+14bps) end following the sell-off of the APR-2023 (+41bps) bond. Conversely, the average yield contracted at the long end (-3bps) following demand for the MAR-2036 (-11bps) bond; the mid-segment was flat.
Last week, the secondary market for FGN bonds was slightly bullish due to increased market liquidity on the back of inflows from bond coupon payments, thereby supporting demand levels. The average yield declined by 3 basis points to close at 11.2%.
T-Bills Yield Gyrates as Demand for Long-Dated Securities Rise
