Treasury Bill Yield Rises as Naira Tumbles

Treasury Bill Yield Rises as Naira Tumbles

Treasury bills yield rises on Thursday as the Nigerian local currency, the naira tumbles amidst pre-election year demand for foreign currencies, lower accretion into external reserves and rising import bills.

At the Investors and Exporters, foreign exchange window, data from FMDQ Exchange shows that the naira depreciated by 0.1% to N420.50. Today, the market selloffs persisted in the fixed income market, and a similar trend occurred in the equity space.

This signal a higher demand for cash by investors seeking to balance positions amidst Nigeria’s rising headline inflation rate which printed at 17.71% in May, according to the Nigerian Bureau of Statistics. In the money market, there was stability in the financial system liquidity as short-term rates were relative unmoved, thus keeping interbank rates unchanged. 

In a market report, Cordros Capital said the overnight lending rate was unchanged at 14.0%, the position which analysts attributed to the absence of any significant funding pressure on the system. Traders said activities in the Nigerian Treasury Bills secondary market were mixed, but with a bearish tilt as the average yield expanded by two basis points to 4.7%.

Across the curve, Cordros Capital reported that the average yield expanded at the short (+11bps) and mid (+13bps) segments following profit-taking activities on the 14-day to maturity (+82bps) and 161-day to maturity (+67bps) bills, respectively.

But average yield contracted at the long (-12bps) end as participants demanded the 329-day to maturity (-49bps) bill. Elsewhere, the average yield was unchanged at 4.6% in the open market operations (OMO bills) segment.

In the Federal Government secondary market, trading activities ended quietly, as the average yield closed flat at 11.1%. Across the benchmark curve, the average yield inched higher at the short (+1bp) and mid (+1bp) segments as investors sold off the MAR-2024 (+22bps) and APR-2029 (+1bp) bonds, respectively. READ: Fixed Income Market Tumbles as Investors Take Profit on Debt Instruments

The average yield pared at the long (-1bp) end due to demand for the MAR-2036 (-3bps) bond, according to traders’ notes. # Treasury bill Yield Rises as Naira Tumbles