Treasury Bills Yield Slides to 6.12% Ahead of Auction

Treasury Bills Yield Slides to 6.12% Ahead of Auction

The average benchmark yield on Nigerian Treasury bills registered 9 basis points decline to 6.12% in the secondary market ahead of the Central Bank of Nigeria (CBN) primary market auction sales scheduled for midweek.

In the last five trading sessions, the Nigerian Treasury bill market was quiet as banks halt selling rallies given the solid liquidity level that registered throughout the week.

The CBN will roll over maturing Treasury bills worth N141.94 via the primary market auction sales split into 91-day bills worth N3.15 billion, 182-day bills worth N1.49 billion, and 364-day bills worth N137.30 billion.

Trading pattern in the fixed income market has remained largely the same as investors await catalysts to drive yield repricing. At the CBN’s previous auction, healthy liquidity in the financial system supported a decline in spot rates across tenor instruments refinanced.

Despite the surge in headline inflation and interest rates, the Nigerian government has been selling debt securities at abysmally low rates. Despite the financial repression, fund managers intensified bill buying amidst a shortage of alternative investment windows.

“It costs money to keep money”, Pension Fund Administrators chief told MarketForces Africa saying there is government regulation that backs how pension assets should be allocated.

Macroeconomic events in Nigeria largely remained on the same trajectory with inflation sustaining its uptick, the external reserve balance continued to deplete and the exchange rate on the Investors & Exporters Fx window depreciated further after the local currency floated. 

Liquidity levels remained robust at the weekend causing a further decline in short-term benchmark rates.  The overnight lending rate dipped by 75 basis points to 1.3% as the system remain afloat with liquidity.

Market analysts said in an update that average system liquidity remained at a net long position of N782.85 billion from N874.39 billion in the prior week. On Thursday, the financial system liquidity closed slightly lower at ₦847.36 billion when compared to the previous day’s record of ₦896.34 billion.

“Barring any significant outflows from the system, we expect the overnight lending rate to remain depressed in the new week, given the healthy system liquidity”, analysts at Cordros Capital projected.

Notably, market participants showed an attraction towards instruments at the long spectrum of the curve, particularly the 245-day to maturity (-168bps) and 231-day to maturity (-61bps) bills.

The buying momentum on these bills caused a decline in yield level. Market analysts’ notes showed that 245 days to maturity saw its yield dip by 168 basis points while bullish interest in 231 days to maturity dragged yield down by 61 basis points. #Treasury Bills Yield Slides to 6.12% Ahead of Auction Nigerian Treasury Bills Yield Rises to 7%