Yield on Nigerian Treasury Bill Moderate over Surging Demand
The average yield on Nigerian Treasury bills declined as traders in the secondary market ramped up naira assets as preferred options to reduce inflation scotch on wealth.
The buying momentum as unmet bids at the apex bank primary market auction filter through the secondary space. Though spot rates diverged at the primary auction, the lower tenor was priced higher with a deliberate effort to reduce the rate on 364- day.
For investors, inflation is an enemy of the naira asset. Unfortunately, there is an addition to the pressures on real return on investment: the fluctuation in exchange rate movement.
However, the lack of an alternative investment window has kept demand for Treasury bills up, compared with FGN bonds – the Debt Management Office’s subdued spot rates on borrowing instruments.
Yesterday, the secondary market for Nigerian Treasury Bills was active and bullish, driven by strong buy sentiment across short, mid, and long tenors, which led to a 32 bps drop in the average T-bills yield to 20.39%.
The bullish momentum was partly supported by increased liquidity in the financial system. In the absence of stronger outflows, liquidity levels in the market. Then, short term benchmark interest nosedived, though interbank rates remained elevated.
Data from FMDQ showed that the open repo rate declined by 171 bps to 30.69% due to improved funding levels. Also, the overnight lending rate declined 156 basis points to close at 31.44% as system liquidity strengthened.
Traders reported that the average yield declined in the short (-69 bps), mid (-3 bps), and long (-5 bps) segments. The contractions across the curve were attributed to demand for the 45-day to maturity, which shed 506 bps; the 178-day associated yield dropped by 4 bps; and the 332 day to maturity declined by 5 bps.
Also, the average yield contracted by 4 basis points to 20.8% in the open market operations (OMO) bills segment in the secondary market, according to investment banking firms.
The yield curve has shifted strongly following the unprecedented rise in the monetary policy rate by 750 basis points so far in the year to 26.25%, thereby pushing up rates across markets. #Yield on Nigerian Treasury Bills Moderated over Surging Demand Moody’s Downgrades Uganda’s Ratings, Changes Outlook to Stable
