T-Bills Yield Rises Sharply after CBN Sells at Higher Rates

The average yield on Nigerian Treasury bills (NTB) climbed significantly to 14.42% in the secondary market following a strong spike in spot rates offered by the Central Bank (CBN) primary market auction (PMA) during the week.

The average yield on Treasury instruments advanced as investors offloaded naira assets across the financial markets. Across the curve, Cordros Capital Limited told investors via email that the average yield increased at the short (+435bps), mid (+449bps), and long (+221bps) segments.

This happened as market participants sold off the 49-day to maturity bills; 105-day to maturity bills and 196-day to maturity bills, traders at the investment firm told investors. The selloff lifted the yield on short-dated bills higher by 744 basis points.

Also, as fund/assets managers offloaded bills at the belly of the curve, its associated yield rose by 566 basis points and selloffs on 196 days to maturity lifted yield by 547 basis points. The equities segment of the Nigerian Exchange has been bearish for four consecutive trading sessions due to market correction.

In the debt market, there have been selling rallies as liquidity in the financial system comes under stress, pushing short-term interest rates higher. Nigerian deposit money banks are seeking liquidity to fulfil funding their obligations, resulting in portfolio haircuts, and a rush to CBN’s standing lending facility.

Then, the short-term benchmark interest rates in the money market space rose further. In its market update, Cowry Asset Limited told investors via email that key money market rates such as the open repo rate and overnight lending rate rose to 24.50% and 25.79%, respectively.

The financial system was debited N582.94 billion for primary market auction sales conducted by the apex bank midweek, reducing the size of liquidity in the financial system. With the marker dictates, the average T-bills yield rose by 263 basis points to 14.42% because of yield expansion seen in the 07-Mar-24 and 28-Mar-24 instruments. 

The CBN conducted its T-bills primary auction on Wednesday, selling instruments worth N1.0 trillion across the 91-day, 182-day, and 364-day maturities, the same as the amount offered. Relative to the previous auction, stop rates on the 91-day and 182-day maturities increased expressively to 17.24% and 18.00%, respectively from 5.00% and 7.15%.

Similarly, the 364-day maturity rose to 19.00% from 11.54. Total subscriptions amounted to over N1.9 trillion, representing a bid-to-cover ratio of 2.0x across the three maturities, with demand greatest for the 364-day maturity.

However, the secondary market for Nigerian Treasury Bills closed in a mixed trend on Thursday as a result of the T-Bills auction on Wednesday, according to Cowry Asset Limited market note. Exchange Rates Diverge as FX Supply Sinks 3.5%

Elsewhere, the average yield was flat at 9.6% in the OMO bills segment in the secondary market due to inactive trading positions. #Treasury Yield Rises Sharply as CBN Offers Higher Rates on Bills