T-Bills Yield Rises to 6.6% Despite Robust Liquidity Record
Despite a surge in liquidity level in the financial system, the average yield on Nigerian Treasury bills (NTB) spiked by 32 basis points to 6.6% in the secondary market. Broadly, the fixed income securities market has sustained discounting impacts of significant economic events and development that could drive yield repricing to a level that matches expectations.
Inflation has maintained an uptrend, and the benchmark interest rate has widened by 700 basis points but the lack of alternative investment windows and regulatory demand from pension asset managers have kept the market in active buying.
On Monday, investors switched to bill buying as the debt management office held its monthly auction on Monday. Traders noted that though the market recorded a sizeable liquidity level, the interbank rate steadied.
Short-term benchmark rates, open repo, and overnight lending rates were unchanged at 11.70% and 12.20%, respectively as the system liquidity closed at a net long position of N711.13 billion, according to Cordros Capital Limited.
The money market has not fully adjusted to the ongoing economic reforms-induced buying momentum as investors await catalysts to drive yield repricing amidst interest, and inflation surges.
Cordros Capital noted that across the curve, the average yield expanded at the short (+180bps) end following the sell-off of the 66-day to maturity (+379bps) bill; but was unchanged at the mid and long segments.
Explaining the trend, TrustBanc Capital Limited told investors in a market brief that despite the surge in available liquidity, local investors exited short-dated bills, especially the Aug-23 (+379bps) and Sep-23 (+162bps) bills.
The Federal Government of Nigeria (FGN), through the Debt Management Office (DMO), conducted a bond auction on Monday, June 19, 2023. The total amount on offer is expected to be between N320 billion and N400 billion from four issues.
The instruments include one re-opening issue (APR 2029) and three new issues (JUN 2033, JUN 2038, and JUN 2053, Meristem Securities said in its pre-auction note. #T-Bills Yield Rises to 6.6% Despite Robust Liquidity Record
