Treasury Bills Yield Rises as Naira Falls to N418.33
Weak Naira Hits Treasury Asset Yields: The average yield on Nigerian Treasury bills inched higher midweek at the same time when the local currency, the naira, shed 0.3 per cent at the official foreign exchange window.
Data from FMDQ Exchange shows that the naira depreciated by 0.3% after demand pressures to N418.33 per the United States dollar at the Investors and Exporters foreign exchange window.
The local currency has been relatively overvalued but macroeconomic pressures could not allow the monetary policy authority to depreciate the local currency.
The Central Bank of Nigeria (CBN) managed the local currency via multiple exchange rates, and maintain intervention across FX markets to protect the local currency from free-falling.
Despite that, Naira has sustained an unofficial self-devaluation at the parallel market when the local currency was exchanged at N601 to a dollar on Wednesday.
In the money market, short term rates adjusted upward following liquidity pressure in the financial system. The average interbank rate spiked due to a large jump in both open buy back and overnight lending rates.
Specifically, the overnight lending rate expanded by 383 basis points to double digits low rate of 12.7%, according to market data.
Meanwhile, trading activities in the Nigerian Treasury bills secondary market closed with bearish sentiments, according to Cordros Capital analysts note.
The average yield expanded by 32 basis points to 3.6% as investors sold off in a way to reposition portfolios amidst a rising headline inflation rate. Across the curve, fixed income securities traders said the average yield expanded at the short (+33bps), mid (+36bps), and long (+15bps) segments
Cordros Capital said in its report that market participants sold off the 71-day to maturity (DTM) (+68bps), 141DTM (+46bps), and 330DTM (+454bps) bills, respectively. Similarly, the average yield expanded by 13 basis points to 3.9% in the open market operations (OMO bills) segment.
In the secondary market for the Federal Government of Nigeria (FGN) bond, trading activities were bearish as the average yield expanded by two basis points to 10.9%. Across the benchmark curve, traders said the average yield expanded at the short (+5bps) and mid (+1bp) segments.
Today, the market sees investors selling off the MAR-2027 (+15bps) and FEB-2028 (+8bps) bonds, respectively; but remained flat in the long end. #Treasury Bills Yield Rises as Naira Falls to N418.33