Treasury Bills Yield Rises Sharply after Interest Rate Hike
The Nigerian Treasury bills yield rose sharply as the market reacted to the monetary policy rate hike, a part of central bank efforts to anchor the country’s double-digit high headline inflation rate.
In the secondary market, fixed interest securities investors dumped their Treasury Bills holdings, a switch in mood when compared to market rally experience in the prior day. While the real return on investment has improved, the market reacted with a quick profit taking attitude amidst the Central Bank of Nigeria’s (CBN) main auction on Wednesday.
The market negative interest yield fell to 4.9% after the CBN increased the benchmark interest rate to 27.25% to anchor inflation, which decelerated to 33.15% in August. The apex offered investors N127 billion worth of Nigerian Treasury bills at its main market auction on Wednesday.
In the past auction sales, the CBN slashed rates across standard tenor as inflation moderated. Trading activities were relatively low as participants shifted their focus to the primary market auction. However, the market sentiment was bearish, with yields rising strongly, up by 108 basis points, with sell pressure seen across the short, belly, and long ends of the curve.
As a result, the average mid-rate across the benchmark NTB papers increased by 108 bps to settle at 21.8%. “We expect the NTB auction result to influence market direction on Thursday,” fixed income traders said. In its market update, Cordros Capital Limited stated that across the curve, the average yield advanced at the short (+137bps), mid (+94bps), and long (+99bps) segments.
The yield expansion seen across these curves in the secondary was due to sell pressures on the 78-day to maturity, with 491bps yield surge. Investors selling pressure at the belly of the curve nudged the yield on 134-day to maturity upward by +180bps.
At the long end of the curve, investors sell activities on the 211-day to maturity Treasury bill, which pushed its yield higher by +165 bps. Conversely, the average yield dipped by 2 bps to 23.6% in the OMO bills segment, traders said in a note. #Treasury Bills Yield Rises Sharply after Interest Rate Hike CBN Defends Naira with $39m in Forex Market
