Treasury Yield Bumps as CBN Auction N129 Bln Bills

Treasury Yield Bumps as CBN Auction N129 Bln Bills

The average yield on Nigerian Treasury bills falls five basis points midweek as Central Bank auctioned N129 billion bills at the primary market. Rising headline inflation rate amidst low-interest rate environment has widened negative real return on financial instruments.

To keep exposure lower amidst uncertainties, analysts are predicting that fixed income investors would trade cautiously ahead of an election year.

In the money market, there was healthy liquidity in the financial system, strong enough to curtail funding pressures. Due to this, the average interbank rate remains relatively steady.

Data from the Nigerian Exchange shows that the overnight lending rate remained unchanged at 1.85 per cent, and the Open Repo rate also remained unchanged at 1.50 per cent.

Meanwhile, Nigerian local currency, Naira, appreciated by 0.02 per cent as the dollar was quoted at ₦416.25 as against the last close of ₦416.33 at the Investors and Exporters foreign exchange window.

Most participants maintained bids between ₦410.00 and ₦444.00 per dollar, according to FSDH Capital. However, the foreign exchange rate in the parallel market faced moderate pressures due to higher demand.

In the secondary market for Nigerian Treasury Bills midweek, average yield across the curve declined by 5 basis points to 4.48 per cent from 4.53 per cent on the previous day. According to fixed income traders’ notes, the average yield across the medium-term maturities declined by 17 basis points as demand increased.

However, FSDH Capital note shows that the average yields across short-term and long-term maturities remained unchanged at 3.50 per cent and 5.20 per cent, respectively. NTB 28-Apr-22 (-51 bps) maturity bill witnessed buying interest, while yields on 9-day to maturity bills remained unchanged.

At the Primary Market Auction held today, the CBN offered NT-Bills worth ₦129.33 billion across 91-day (₦2.68 billion), 182-day (₦3.54 billion), and 364-day (₦123.11 billion) tenors.

In the OMO bills market, the average yield across the curve closed flat at 5.65 per cent. Average yields across short-term and long-term maturities remained unchanged at 5.31 per cent and 5.82 per cent, respectively.

Trading activities on FGN bonds in the secondary market ended with a bullish tilt as the average bond yield across the curve cleared lower by 12 basis points to close at 11.50 per cent from 11.62 per cent on the previous day.

Demand for FGN Bonds increased as DMO revealed a plan to raise N480 billion through the local debt market in the first quarter of 2022. In its note, FSDH Capital hints that average yields across short tenor, medium tenor, and long tenor of the curve decreased by 42 basis points, 8 basis points, and 3 basis points, respectively.

The 23-MAR-2025 maturity bond was the best performer with a decrease in the yield of 73 basis points, according to fixed income traders and analysts. Elsewhere, the Debt Management Office listed the $4 billion Eurobond issued by the Federal Government of Nigeria on the FMDQ Securities Exchange on January 25.

Earlier on September 28, 2021, the Eurobond was issued in three tranches: 7-years $1.25 billion at 6.125 per cent p.a., 12-years $1.5 billion at 7.375 per cent p.a., and 30-years $1.25 billion at 8.25 per cent p.a., as part of the fund-raising for the implementation of the 2021 Appropriation Act.

The Eurobond will also be listed on the Nigerian Exchange Limited. The listing of bonds on these two (FMDQ and NGX) securities exchanges will enlarge their scope while also providing a diversified pool of financial offerings for investors.

Read: T-Bills Yield Bumps to 5.2% as Fixed Income Market Trades Quiet