Treasury Bills Yield Rises 34bps Amidst Inflation Concern

Treasury Bills Yield Rises 34bps Amidst Inflation Concern

Trading activities on Nigerian Treasury bills (NTBs) ended on a bearish note last week as the average yield rose by 34 basis points to 8.2% due to selling pressures.

According to investment analysts lower liquidity in the financial system weakened demand for T-bills as well as other fixed interest securities in the market.

The overnight (OVN) rate expanded by 16.3% week on week to 18.8%, as regulatory CRR debits of about. N179.00 billion across the financial system compressed the system liquidity this week.

Accordingly, the average system liquidity settled lower at a net long position of N164.66 billion versus a net long position of N286.55 billion in the previous week.

The market is expected to experience outflow following the FGN bond auction worth N360.00 billion this week, and analysts said this will likely offset the expected inflows from the FGN bond coupon payments of N51.12 billion and OMO maturities worth N10.00 billion.

Based on these expectations, market analysts said they expect the overnight lending rate to trend higher as pressure mounts on liquidity in the financial system.

As a result, the average yield across the market expanded by 34bps to 8.2%. Across the market segments, the average yield in the NTB segment increased by 37bps to 7.9%, Cordros Capital said in a market report.

However, the yield curve contracted by 3 basis points to 13.3% in the OMO secondary market following a general decline in spot rates on TBills at the Central Bank auction.

At the auction, the CBN offered instruments worth N214.74 billion – N1.03 billion for the 91-day, N10.55 billion for the 182-day and N203.15 billion for the 364-day – to market participants.

Demand at the auction was lower than the previous PMA when investors staked N1.54 trillion, as the total subscription level settled at N875.74 billion.

Eventually, the CBN allotted precisely what was offered at respective stop rates of 4.50% for 91-day bills, a 69 basis points decline from 5.19% offered at the previous auction.

Also, 182-day bills dropped by 100 basis points to 7.00% and 364-day bills were sold at 12.55%, a significant decline of 139 basis points compared with the spot rate of 13.94% in the previous auction.

Analysts at Cordros Capital said they envisage sustained depressed demand for bills in the secondary market following our expectations of tight system liquidity.

“.. We believe yields in the secondary market will maintain its northward trend. Meanwhile, we expect market focus to be shifted to the NTB PMA holding on Wednesday where the CBN is scheduled to roll over N152.20 billion worth of maturities”, analysts stated.

Nigeria’s inflation rate accelerated to 24.08% in July, according to statistics office data, and analysts’ estimates show consumer price index would rise further throughout 2023. ##Treasury Bills Yield Rises 34bps Amidst Inflation Concern

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