Yield Climbs as CBN Increases Rates on Treasury Bills

The average yield climbed as the Central Bank of Nigeria (CBN) increased spot rates on Nigerian Treasury Bills auctioned in the primary market. The apex bank sold bills at higher rates to attract investors into the space following a spike in the inflation rate.

Investors’ returns on naira assets have been largely exposed to high inflation and interest rates conditions but the liquidity position has sustained the demand level registered at the previous auction. This allowed authority to reprice rates based on the direction observed.

In the just concluded week, trading activities in the T-bills secondary market turned bearish as investors took profits on positions across the curve, traders at Cordros Capital Limited told investors via email. 

Across the market segments, analysts stated that the average yield advanced by 333 basis points to 6.7% in the NTB segment but pared by a basis point to 8.4% in the OMO bills secondary market.

At the midweek primary auction, the apex bank offered instruments worth N231.82 billion to investors for subscriptions. The offer was split as N7.85 billion for the 91-day, N6.44 billion for the 182-day, and N217.53 billion for the 365-day bills – to participants.

Total subscription at the auction settled at N1.09 trillion, resulting in a bid-to-offer of 4.7x. According to Cordros Capital, more demand skewed towards the longer-dated bill which attracted N1.04 trillion subscription.

The auction result showed that the CBN allotted precisely what was offered at respective stop rates.  Treasury bills for 91-day were sold at 5.00%, rising from 2.44% previously offered to investors. Also, 182-day bills attracted 7.15%, which is a steep increase from 4.22% previously offered to investors. 

Long-dated treasury bills instrument for 364-day was closed at 11.54% from 8.40% at the previous auction. In the money market, the Overnight Nigerian Interbank borrowing rate demonstrated a downward trajectory, experiencing a 0.33% decrease to 19.50%, as the system liquidity improved.

Key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN) declined to conclude at 17.58% and 18.83%, respectively, Cowry Asset Limited told investors in an email.  Selloffs Provoke Spike in Nigerian Treasury Bills Yield

The overnight (OVN) rate contracted by 442 basis points to 18.83%, as the inflows from the FGN bond coupon payments worth N216.59 billion and CRR refunds totalling N240.00 billion supported financial system liquidity.

Against the preceding, system liquidity settled higher at a net long position of N487.45 billion versus a net long position of N334.16 billion in the previous week. #Yield Climbs as CBN Increases Rates on Treasury Bills