Treasury Bills Yield Declines as CBN Halts Inflation Fighting
The Nigerian Treasury bills yield fell strongly in the secondary market as the Central Bank of Nigeria (CBN) kept the benchmark interest rate at 27.50%. The monetary policy committee of the CBN kept all parameters unchanged at the just-concluded meeting, halting policy tightening after a long fight.
Traders said in separate notes that investors reacted positively to the CBN’s hawkish pause, reducing inflation-fighting interest rate adjustment. As investors rush to increase portfolio size, the average yield on Nigerian Treasury bills declined by 175 bps to 20.2%, Cordros Capital Limited said.
After the midweek auction, some investors turned to the secondary market to compensate for lost bids. However, they resisted lower offers, with most unwilling to trade below the 18.00% threshold.
Investors also remained cautious ahead of the MPC meeting later in the day. As anticipated, the CBN maintained all policy parameters unchanged, keeping the MPR at 27.50%. Following the announcement, limited interest persisted on the long end above 18.00%.
Across the curve, the average yield declined at the short (-173 bps), mid (-146 bps), and long (-187 bps) segments, traders said. The yield contracted as a result of demand for the 14-day to maturity (-306 bps), 168-day to maturity (-205 bps), and 259-day to maturity (-378 bps) bills, respectively.
Also, it was observed that post-primary market auction activities boosted demand for treasury bills; unmet bids were filled via secondary market transactions. This was further supported by a net auction settlement of ₦505.38 billion.
Profit-taking by market players from auction winnings was countered by strong demand, particularly for the newly issued 364-day paper, pushing its secondary market yield lower.
Analysts expect the prevailing market sentiment to persist, albeit at a moderate pace, as liquidity conditions remain tight and investors digest signals from the monetary policy interest rate. Similarly, the average yield declined by 2 bps to 25.5% in the OMO segment.
