Yield on Nigerian T-Bills Rises Ahead of CBN Auction
Ahead of the Central Bank of Nigeria (CBN) primary market auction (PMA), bearish trading activities on Nigerian Treasury bills have pushed average yield higher despite robust liquidity in the financial system.
Traders said Nigerian Treasury bills worth N187.11 billion would mature via the primary market, equating to T-bills worth N187.11 billion to be auctioned by CBN via the primary market. The auction is expected to be split into 91-day bills worth N1.75 billion, 182-day bills worth N17.16 billion, and 364-day bills worth N168.21 billion.
“…we expect the stop rates of the issuances to decline amid demand pressure”, Cowry Asset Management told investors in its market note. Market critics have continued to accuse the authority of financial repression amidst rising inflation rate in the country.
Nigeria’s inflation rate has accelerated ahead of rates on government instruments, resulting in negative interest rates on naira assets. The trend makes the fixed income market unattractive to foreign portfolio investors who remained on the sideline despite the naira devaluation.
The Nigerian Treasury Bill started the previous week with notable selloffs, pushing the average benchmark yield to 6.46% on Monday. However, the market remained relatively quiet for the rest of the week with minimal activity.
Market players were noted to book profits on holdings, which caused an expansion in yields at the short end of the curve, particularly on the 63-day to-maturity and 77-day to-maturity bills.
Selloffs in short-dated Treasury bills with 66-day to maturity triggered a 379 basis points increase in its yields, and 77-day to maturity bills yields rose 162 basis points.
Overall, the average benchmark yield increased by 480 basis points (bps) to reach 6.22% from 5.93% in the previous week, Futureview Financial Services told investors in a note. >>>Nigerian Treasury Bills Yield Rises to 7%
At the end of the week, interbank rates experienced a significant decline, dropping to single-digit levels. In their reports, analysts attributed the liquidity surge to a substantial FAAC allocation of N786.16 billion that hit the system.
At the end of the week, the average liquidity level settled higher at a net long position of N755.96 billion versus N170.00 billion in the previous week, Cordros Capital Limited told investors in its market report.
In the money market on Friday, short-term benchmark rates: the open repo, and overnight lending rates settled at 2.90% and 3.40% respectively, marking a weekly decrease of 7.5% and 7.19%. Traders projected higher demand for Treasury bills this week, which will lower yields in the secondary market.
However, investors’ focus is expected to be shifted to the Nigerian Treasury bills primary market auction holding on Wednesday, with the CBN expected to roll over N187.11 billion worth of instruments. #Yield on Nigerian T-Bills Rises Ahead of CBN Auction
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