Yield Nears 26% as Selloffs Hit T-Bills Market after Rate Cut
The average yield near 26% as investors in the secondary market trimmed their treasury bills holdings after spot rate on one year bills was slashed by 57 basis points at the midweek auction conducted by the Central Bank of Nigeria (CBN).
As interest rate benchmark increased in the face of rising consumer price index, the market anticipates to earn higher returns on their portfolios. Traders have consistently rebalancing their books to optimise returns.
Disappointed over spot rate cut on one-year Treasury bills at the auction, investors mood was altered amidst prediction that inflation rate would rise further down the year due to high petroleum price in Nigeria.
Fixed income market analysts noted that after interest rate was hiked to match inflation surge, negative interest yield on naira assets has narrowed.
On Thursday, the market experienced an active trading session following the results of primary market auction, where the stop rate for the 364-day paper decreased by 57 bps, closing at 22.93%.
As a result of the unmet bids, analysts noted that interest intensified in the secondary market, particularly for the newly issued 1-year bills maturing on December 4, 2025, which settled about 100 bps lower than the auction rate.
Fixed income market analysts noted that investors’ sentiments was mixed, with bearish tone. Demand was seen on selected papers at the short to mid ends, but this was offset by selloffs across the curve, particularly at the long end, TrustBanc Financial Group said in a note.
The investment firm revealed that the 9-Jan maturity experienced the biggest increase in yield, advancing by 96bps. In contrast, the 9-Oct paper recorded the sharpest decline in yield, dropping by 12bps.
Analysts also said in the report that modest bids were observed on the newly issued 364-day paper, with the secondary market yield easing to around 22% levels on the day. Overall, the average benchmark yield advanced by 32bps, closing at 25.82%, TrustBanc said.
Cordros Capital Limited explained in an emailed note that across the curve, the average yield expanded at the short (+46bps), mid (+20bps), and long (+5bps) segments. The yield expansion was attributed to selloffs at the short, belly and long end of the curve.
Specifically, investors took profit on 49-day to maturity bills (+113bps), 126-day to maturity bull (+85bps), and 203-day to maturity bills (+28bps) bills, respectively.
Conversely, the average yield contracted by 32bps to 27.2% in the OMO bills segment in the secondary market. #Yield Nears 26% as Selloffs Hit T-Bills Market after Rate Cut#
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