Treasury Bills Yield Rises, Disinflation to Widen Real Return
The average yield on Nigerian Treasury bills climbed slightly to 18.36% as the secondary market experienced mild selling pressure at the beginning of the week.
Investors exited positions amidst successive squeezes in yields on the naira asset ahead of inflation data for June. The consumer price index has been projected to ease, reflecting the expectation that Nigeria’s reforms have started healing dislocated macro indicators.
Inflation reduced to 22.97% in May, but the interest rate benchmark has remained unchanged at 27.75%, which makes the real return on investors hover at 4.53%.
“If inflation rate eventually drop further, real return on investment will surpass 5%, creating ample opportunity for monetary policy easing,” a slew of analysts told MarketForces Africa.
There was limited movement across the yield curve. Modest interest emerged selectively on the November, March, and July tenors. However, overall volume remained light throughout the session.
Across the curve, the average yield contracted at the short (-2 bps) and mid (-14 bps) segments. The yield decline was driven by the demand for the 73-day to maturity bills, whose yield dipped by -3 bps.
Investors show interest in naira assets at the belly of the curve, affecting yield levels. Traders reported strong demand for Nigerian Treasury bills maturing in 178 days, plunging its yield down by 64 bps.
On the other hand, there was a reported sell-down in the end of the curve. Investors exited positions at the long end, and this pushed its yield line higher by +12 bps.
Investors took profit on Nigerian Treasury bills maturing in 297 days, which caused their yield to climb by +76 bps. Conversely, the average yield contracted by 5 bps to 24.6% in the OMO segment.
At close, the average Nigerian Treasury bills benchmark rate edged a basis point higher to 18.36%. Analysts said prevailing market sentiment is likely to continue amid ongoing liquidity constraints.#Treasury Bills Yield Rises, Disinflation to Widen Real Return #
Benchmark Yield Crashes as Investors Hunt FGN Bonds
