Yield on Nigerian T-Bill Rises to 8.2% Ahead of Auction

Yield on Nigerian T-Bill Rises to 8.2% Ahead of Auction

Benchmark yield on Nigerian Treasury bills rose to 8.2% ahead of the Central Bank of Nigeria (CBN) primary market auction which the Debt Management Office is expected to conduct by midweek. Though trading activities ended on a bearish note, last week, the market opened with strong buying momentum.

At the close of the trading sessions last week, the fixed income market registered a higher liquidity level which analysts believe would drive buying momentum in the new week. Meanwhile, the apex bank, as part of liquidity management efforts, would roll over maturing bills totalling N36.56 billion.

According to investment analysts’ notes, these include 91-day bills worth N2.78 billion, 182-day bills worth N3.02 billion, and 364-day bills worth N30.76 billion. Trading activities ended on a mixed note as investors continued to search for inflation-protected naira assets investment amidst negative interest yield on fixed interest instruments.

Due to improved liquidity in the system, trading activities started on a bullish momentum eased At the auction, analysts at Cowry Asset Management said they anticipate that stop rates for these issuances may rise due to tightening liquidity conditions and expectations that CBN could narrow the interest rate corridor, causing interest rates to increase across the board.   

Earlier in the week, asset and fund managers increased buying interest on treasury bills instruments. However, the market ended the week on a bearish note.   In the money market, the overnight lending rate declined by 170 basis points to 1.7% last week as a result of an uptick movement in liquidity level.

This happened following FAAC disbursements. Investment firms, and analysts reported that FAAC allocation worth N668.86 billion supported system liquidity despite cash reserve ratio (CRR) debits of about.N718.00 billion.

In its market update, Cordros Capital said the average system liquidity closed higher at a net long position of N804.77 billion compared with a net long position of N137.20 billion in the previous week.

Data from FMDQ showed that the overnight lending rate was depressed throughout the week until FAAC inflows hit the financial system.  Analysts said they expect funding rates to remain low given ample financial system liquidity and additional inflows from OMO maturities worth N10.00 billion.

There is no expectation of significant outflows in the new week after the CBN slammed local lenders about N700 billion cash reserve ratio debit for not meeting loan targets.

Across market segments, analysts said the average yield advanced by 5 basis points to 8.0% in the NTB secondary market but declined by 3 basis points to 12.1% in the OMO segment. Investment analysts are envisaging sustained demand for T-bills in the secondary market on expectations of higher liquidity in the system.  Yield on Nigerian T-Bill Rises to 8.2% Ahead of Auction

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