Treasury Bills Yield Slowdown as FX Spread Hits 36%
The average yield on Nigerian Treasury Bills slowdown in the secondary market Tuesday ahead of inflation data for the month of August schedule for the week. National Bureau of Statistics will release the headline inflation rate figures for August this week and analysts are already predicting a further decline anchored on low base effect in 2020.
Average yields on fixed income instruments have started tumbling since the inflation rate drop in April after 19 consecutive months of an uptrend, and the slowdown has persisted till July when the consumer price index printed at 17.38%
In the money market, interbank rates slow down again as liquidity pressure eased. Data from the FMDQ platform shows that open buy back (OBB) declined 50 basis points to 14%.
Similarly, the overnight lending rate contracted by 25 basis points to 14.5% in the absence of any significant funding pressures on the system.
According to Cordros Capital analysts, trading activities in the Nigerian Treasury Bills secondary market closed on a bullish note, as the average yield contracted by 9bps to 4.8%.
Across the curve, analysts said the average yield contracted at the short (-30bps) and mid (-5bps) segments due to demand for the 16-Day To Maturity (-36bps) and 121DTM (-13bps) bills but was flat at the long end.
Similarly, the average yield at the open market operations (OMO) segment contracted by 14 basis points to 6.1%. The Treasury bond secondary market was bearish, as the average yield expanded by 22 basis points to 11.3%.
Across the benchmark curve, the average yield expanded at the short (+10bp), mid (+55bps), and long (+18bp) segments following demand for the MAR-2027 (+69bps), FEB-2028 (+60bps) and MAR-2050 (+52bps) bonds, respectively.
In the foreign exchange market today, the naira appreciated by 0.2% to N412.08 a dollar at the Investors & Exporters window but depreciated by 1.3% to N557.00 a dollar in the parallel market.
Last week, opening market liquidity was reported at NGN68.1bn on Friday (10 Sep ‘21). Overnight and repo rates closed within a range of 14.5-16.0%. The secondary market for NTBs was largely bearish due to the increased supply of NTBs and OMO bills from the auctions in the past weeks.
Last week, the Nigerian autonomous foreign exchange (NAFEX) rate depreciated by 0.1% to close at N412 to a dollar. However, the Naira depreciated by 2.83% or N15.0 in the parallel market to close at N545.
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The depreciation can be partly attributed to foreign exchange scarcity in the parallel market and ongoing speculative trading in the same market, according to Coronation Research. As a result, analysts said the gap between the Investors and Exporters window and parallel market rate now stands at 32.3%.
However, the black market repriced the local currency at N560 to a dollar today, thus widened foreign exchange spreads to about 36% as demand for the dollar outpaces the CBN supply.
Yields Treasury Bills Slowdown as FX Spread Hits 36%
