Yield Crashes as Treasury Bills Market Rallies
The average yield on Nigerian Treasury bills (NTB) witnessed a strong pullback on Thursday, declining by 169 basis points over sustained buying momentum seen in the secondary market for fixed income securities.
A switch to a bullish mood was partly triggered as liquidity pressures in the financial system eased. The money market closed with more than N1 trillion net balance following large inflows, including FAAC disbursement, reducing funding rates.
Data from FMDQ Exchange showed that the overnight lending rate contracted by 25 basis points to 11.3% as the FGN bond coupon payment worth N953.87 billion pushed system liquidity higher.
Market data tracked from FMDQ Exchange suggest that short-term benchmark rates were much higher, near 20% for weeks until the market received inflows from FAAC, matured bonds and coupon payments.
Following declining spot rates at the Central Bank of Nigeria primary market auction, trading activities in the Treasury bills secondary market were bullish. The average yield contracted by 169 basis points to 7.3%.
“We also anticipate a downward revision of rates at Nigerian T-Bills auction scheduled for Wednesday”, TrustBanc Capital had predicted.
Across the curve, Cordros Capital said the average yield closed flat at the short end but contracted at the mid (-150bps) and long (-224bps) segments.
The contraction in the yield curve was a result of market participants’ demand for 140 days to maturity, which lost 159 basis points and 301 days to maturity, losing 328 basis points.
Last week, the Nigeria Treasury bills and OMO bill secondary markets were quiet all week, as local banks struggled with scarce liquidity throughout the week.
For the Treasury bills secondary market, only a handful of trades were consummated, mostly at the far spectrum of the curve, according to traders’ reports reviewed by MarketForces Africa.
Thus, the average benchmark yields barely moved from levels seen previously, closing at 8.15% and 4.01%, respectively. #Yield Crashes as Treasury Bills Market Rallies Naira Steadies as Banks Issue Update on FX Purchase
