Wave of Selloffs Hit Nigerian T-Bills Market as Naira Falls

Wave of Selloffs Hit Nigerian T-Bills Market as Naira Falls

A wave of selloffs hit the Nigerian Treasury bills secondary market on Thursday as investors weighed the negative impacts of falling local currency, the naira, on their respective portfolios.

Naira assets have come under intense pressure across the financial markets as inflation conditions worsen along with weakening local currency despite a large official currency depreciation in June 2023.

Fixed income securities investors’ interest was dampened amidst negative interest rates in the local debt market, but a lack of alternative investing window forced down asset managers’ investment appetite in the local debt capital market.

Over the year, subscription levels at the Central Bank of Nigeria (CBN) have been significant, allowing spot rates to be priced downward as the debt agency continues to keep funding costs lower.

In the money market, short-term benchmark rates such as the open repo rate (OPR) and the overnight lending rate (OVN), also rose significantly. The OPR increased to 11.83% from 3.50%, and the OVN reached 12.25%, up 805 basis points from 4.20%.

Hence, proceedings in the Treasury bills secondary market ended on a bearish note on Thursday. Traders reported that the average yield expanded by 9 basis points to 7.1%.

Across the curve, Cordros Capital said the average yield advanced at the short (+28bps) and long (+6bps) ends following selling pressures on the 91-day to maturity (+112bps) and 322-day to maturity (+80bps) bills, respectively.

Meanwhile, the yield line closed flat at the mid-segment. Elsewhere, the average yield was unchanged at 12.0% in the OMO segment, according to the investment firm.

In the FGN bond secondary market, trading activities also ended on a bearish note with a pocket of transactions. Consequent to selloffs, prices of government bonds slide. In contrast, the average yield expanded by 17bps to 14.6%.

Across the benchmark curve, the average yield expanded at the short (+38bps) and long (+14bps) ends as market participants sold off the MAR-2027 (+76bps) and MAR-2050 (+50bps) bonds, respectively. Conversely, the average yield was flat at the mid-segment.

Reversing the previous day’s gain, the Nigerian naira depreciated by 4.3% to 837.49 per US dollar at the Nigerian Autonomous Foreign Exchange Market, data from the FMDQ platform showed.

The exchange rate at the open market or the parallel market was steadied at N1,300 per greenback due to surging demand for foreign currency by Nigerians – individuals, government and corporates. #Wave of Selloffs Hit Nigerian T-Bills Market as Naira Falls #IPPIS: FG to Delist Unverified Workers on Oct. 27