Thin Trading Keeps T-Bills Yield Tight as Naira Steadies

Thin Trading Keeps T-Bills Yield Tight as Naira Steadies

Relatively thin trading on the Nigerian Treasury bills keeps the average yield flattish in the secondary market as investors position for the Central Bank of Nigeria (CBN) primary market auction on Wednesday.

After hitting N417 to a dollar in the investors’ and exporters’ foreign exchange window, the Nigerian local currency holds steadies against the greenback at N416.67. Bureau de Change association yesterday said in a report that the exchange rate has worsened since CBN halted dollar sales to operators in 2020.

The market expectation remains that the local currency is relatively overvalued and that there is a possibility CBN will devalue the local currency. Weakening the Nigerian currency further would have negative impacts on the financial markets amidst a high inflation rate, making the naira asset less attractive to hold.

Nigerian banks charge as high as N505 to a dollar for online spending, according to MarketForces Africa channels check conducted, casting doubt on the true exchange rate in the country.

In the money market, short term rates inched upward due to pressures witnessed on the financial system liquidity. Consequently, the interbank rate slowdown as both open buyback and overnight lending rates dipped.

Data from FMDQ Exchange shows that the overnight lending rate expanded by 13 basis points to 5.8% on Wednesday.

Amidst an expectation for the March inflation rate release, trading in the Treasury bills secondary market was quiet as market participants were busy positioning at the CBN auction.

Thus, the average yield closed flat at 3.3%. Across the curve, Cordros Capital said the average yield was flat at the short and mid segments; but pared at the long (-1bp) end following demand for the 330-day to maturity(-5bps) bill.

Elsewhere, traders at the Cordros Capital Limited also noted in the market report that the average yield expanded by 11 basis points to 3.7% in the open market operations (OMO bills) segment. MarketForces Africa reported that spot rates at the previous auctions were steadied.

Also, the FGN bond market traded with bearish sentiments.  The average yield expanded by 5 basis points to 10.9%. There had been heavy buying interest that dragged yield downward in previous trading sessions. 

Across the benchmark curve, traders spotted that the average yield expanded at the short (+14bps) end following profit-taking on the MAR-2025 (+42bps) bond; conversely, the average yield was flat at the mid and long segments. #Thin Trading Keeps T-Bills Yield Tight as Naira Steadies