Treasury Sees Upward Yield Repricing as Liquidity Pressures Ease
Treasury bill sees an upward repricing in average yield as liquidity pressures eased on Thursday following successful completion of the Central Bank of Nigeria (CBN) primary market auction on Wednesday.
The fixed income market witnessed a slowdown in yield repricing in June 2021 as predicted by Atlass Portfolios analysts. Key events that halted upward yield repricing were solid subscription level at apex bank primary market auction, disinflation and policy committee dovish stance on the Nigerian economy.
On Thursday, the financial system sees an inflow from the maturing inflow of N561.05 billion from the JUL 2021 bond and the Federal Government of Nigeria (FGN) bond coupon payment of N40.68 billion.
Consequently, Codros Capital said in a market report that the overnight lending rate contracted significantly by 725 basis points to 7.3%.
Recall that interbank rates had surged double digits due to liquidity squeeze for the most part of the second quarter of 2021 as Nigerian banks built camps at the CBN Standing Lending Facility in order to meet their liquidity requirement.
In the fixed income market, the Nigerian Treasury bill secondary market closed with bearish sentiments as the average yield expanded by 7 basis points to 7.1%, according to Cordros Capital’s email sent to clients.
Analysts noted that across the benchmark curve, average yield expanded at the short (+26bps) end following sell-off of the 77 days to maturity (+33bps) bill but pared at the long (-1bp) end following demand for the 301 days to maturity (-9bps) bill; the mid-segment closed flat.
Elsewhere, the average yield at the open market operations (OMO) segment closed flat at 9.5%.
Meanwhile, analysts noted that trading in the Treasury bond secondary market was bullish as the average yield contracted by 25 basis points to 11.4%.
Across the benchmark curve, Cordros Capital analysts said in the report that average yield contracted at the short (-62bps) and long (-7bps) ends following demand for the JUL-2021 (-353bps) and MAR-2035 (-15bps) bonds, respectively.
Conversely, the mid-segment closed flat. In the currency market, the Nigerian local currency, the naira was flat at N411.20 and N505.00 to a dollar at the Investors and Exporters window and parallel market, respectively. The Nigerian external reserves however drop further to $33.09 billion, barely covers 5-months of imports bill.
Treasury Sees Upward Yield Repricing as Liquidity Pressures Ease
