Treasury Bills Buying Slows after CBN Repriced Rates

Trading activities in the secondary market for Nigerian Treasury bills have slowed down for most of the week as yields on naira assets plunged. The increased buying momentum that started early in the New Year has seen average yield nosediving below 3%.

Investors and traders are hoping to see fresh catalysts that would drive yield repricing in the fixed income market. Compared with the ongoing boom in the equities space, investors have been getting negative interest rates on fixed interest income securities in the local debt capital market.

With both inflation and interest rates staying high, asset managers have been fine-tuning their portfolio strategy to match the risks. In line with the earlier pattern witnessed, trading activities on TBills were quiet yesterday, as the average yield closed flat at 3.0%. Similarly, the average yield was unchanged at 8.4% in the OMO segment.

Last week, the Treasury bills secondary market was bullish, as the average yield across the market contracted by 247 basis points to 4.0% on Friday. Investment firm Cordros Capital Limited attributed the market performance to the feed-through effect from the markedly lower yields at the CBN midweek auction while auction participants looking to fill unmet bids in the secondary market.

Across the market segments, the average yield dipped by 267 basis points to 3.3% in the T-bills segment and contracted by 247 basis points to 8.4% in the OMO secondary market.

At the NTB primary auction, the CBN offered instruments worth N56.56 billion split into N2.78 billion for the 91-day, N1.49 billion for the 182-day, and N52.29 billion for the 364-day bills. The auction was massively contested as the total subscription settled at N1.14 trillion, recording a bid-to-offer of 20.2x. Eventually, the CBN allotted exactly what was offered.

Details from the auction showed that stop rates for 91 days dropped to 2.44% from 7.00%. For 182-day bills, the spot rate declined to 4.22% from 10.00% while 3640-day bills were priced at 8.40% from 12.24%. Likewise, the CBN held an OMO auction, offering participants instruments worth N300.00 billion.

This offer was split into N75.00 billion for the 97-day, N75.00 billion for the 181-day, and N150.00 billion for the 363-day bills. The subscription level at the auction settled at N414.20 billion, translating to a bid-to-offer of 1.4x, with the eventual allotment amounting to N357.20 billion.

Details results showed that N22.00 billion allotment was made for the 97-day, N35.20 billion for the 181-day and N300.00 billion for the 363-day. The 97-day OMO bills attracted 10.50% while the spot rate for 181-day bills rose to 14.00% from 12.00%, and OMO bills for 363-day attracted a spot rate of 17.75% from 15.00%.

In the money market, investment firm Cowry Asset Limited said Nigerian Interbank Borrowing (NIBOR) rates displayed upward trends across all tenor buckets as illiquidity cripples the system. Nigeria Eurobond Slumps after CBN Resumes OMO Auction

Data from FMDQ confirmed that key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), nosedived and concluded at 16.40% and 17.25%, respectively.  #Treasury Bills Buying Slows after CBN Repriced Rates