T-Bills Yield Steadies as Money Market Liquidity Sinks

The average yield on Nigerian Treasury bills (NTB) steadied at about 6.5% in the secondary market after provoked selloffs driven by uncertainties in the macroeconomic conditions. Amidst worsening price instability, the monetary authority has reset its inflation targeting to 21.4% for 2024.

This signifies that the market will be in a tight race in 2024 with an expectation that the central bank would continue interest rate hikes as inflation-fighting tools (though it hasn’t worked the magic) in the absence of other reasonable economic explanations.

Early in January, the yield had plunged below 4% due to increased interest in Naira assets on reformed-driven stronger economic growth expectations. Last week, the average NTB yield increased by +10 basis points to close at 3.4% on Friday.

The tide has however turned against the initial trend in the secondary market as fixed-interest securities investors seek higher return on investment. Portfolio returns have been negative due to exposure to higher inflation, reducing foreign investors’ participation amidst higher interest rates.

Traders reported that Treasury Bills remained in the quiet zone, witnessing a lull outing across all maturities resulting in a flattish close for the average T-bills yield at 6.46%. Similarly, the average yield remained at 8.4% in the OMO segment. The FGN bond secondary market traded quietly, as the average yield was unchanged at 13.5%

In the money market, the short-term benchmark interest rate made an upward trajectory as the system liquidity crunch got tighter. Notably, key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN) rose to conclude at 20.64% and 21.75%, respectively.

“Our expectation in the current week is that money market rates trend upward as the expected outflow from OMO issuance and NTB auctions would likely outweigh the inflow from the expected coupon payments and potential CRR debits”, Coronation Research said in a note. #T-Bills Yield Steadies as Money Market Liquidity Sinks AfDB, Ethiopia Resolve to Normalise Relations