Treasury Bills Market Rallies despite Liquidity Drain
Treasury bills that were purchased in the fixed interest securities market saw a rise following high bids and allotments at the Central Bank of Nigeria’s (CBN) primary market auction (PMA) last week.
The average yield on Nigerian Treasury bills declined by three basis points as investors pumped cash into naira assets across tenors – with particular interest in short and belly of the curve.
Even though the financial system’s liquidity levels were low yesterday, there was a rise in demand for Treasury instruments. Short-term benchmark interest rates rose in the absence of significant inflows.
According to data from Cowry Asset note, the Nigerian Interbank Offered Rate (NIBOR) rose by 0.75% to 32.00%, indicating tightened liquidity in the financial system.
Traders stated that key money market rates such as the Open Repo Rate (OPR) and Overnight Lending Rate (OVN) surged to conclude at 31.41% and 32.08%, respectively.
The buying sentiment continued following lost bids at the auction conducted by the CBN last week, where the apex bank sold less than what the market demanded.
Despite the fact that subscription level came stronger, the apex bank priced 91-day and 182 day treasury bills higher but reduced rate on 364-day bill. Since it has become the most popular asset with the highest subscription, the spot rate reduction on one-year bills has remained constant.
The average yield on Nigerian Treasury bill declined to 20.36% after shedding three basis points. Traders said the average yield contracted in the short (-6 bps), mid (-1 bps), and long (-2 bps) segments, driven by investors’ interest in the 86-day to maturity, whose yield bumped by 30 bps.
Investors also parked fund into 177-day to maturity, causing its associated yield to drop by a basis point in the secondary market. At the end of the curve, 331-day treasury bills lost 2bps of its associated yield due to demand surge
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