Yield Hits 25% as T-Bills Investors React to Rate Hike
The average yield on Nigerian Treasury bills inched higher after the monetary policy committee of the Central Bank hiked the benchmark interest rate by 50 basis points on Tuesday.
In reaction to the policy committee decision, investors in the secondary market trimmed their Treasury bills holdings ahead of primary market auction on Wednesday, July 24, 2024,
The Debt Management Office (DMO) is expected to conduct primary market auction on behalf of the Central Bank of Nigeria (CBN) to refinance maturing bills. DMO would be offering ₦277.96 billion across standard maturities at the auction schedule to hold midweek.
Analysts said liquidity level in the financial system will be a major determinant in the subscription level amidst expectation that spot rates on Bills will be adjusted to match changing market dynamics.
Fixed income analysts explained that the outcome of the auction will set the direction in the secondary market given that last week OMO bills auction failed due to investors’ apathy.
Yesterday, the average yield advanced by 22bps to 25.1%, Cordros Capital Limited said in its market update. Traders said across the curve, the average yield declined at the short (-1bp) and mid (-2bps) segments.
The yield contraction was drive by demand for the 65-day to maturity which shed a basis points. There was also buying interest in 156-day to maturity which caused 2bps yield decline.
Market analysts said the average yield expanded at the long (+43 bps) end, driven by sell pressures on the 261-day to maturity, causing its associated yield to rise by +215 bps. Likewise, the average yield increased by 13 basis points to 24.4% in the OMO segment, according to an investment banking firm note.
AIICO Capital Limited told investors in its note that the firm expects the bearish bias to linger as DMO will be offering N277.96 billion in Treasury bills to investors in the primary market. #Yield Hits 25% as T-Bills Investors React to Rate Hike
