Yield on Nigerian Treasury Bills Reverses Uptrend
The average yield on Nigerian Treasury bills, NTB, backed down after climbing 11% as holders’ intensified bullish momentum amidst robust liquidity in the financial system.
Uncertainties in the Nigerian macroeconomic space filtered into the treasury segment of the fixed income market – with pockets of transactions seeing in the short to medium end of the curve. It appears investors in naira assets favour short positions due to wavering returns on naira assets across Nigerian financial markets.
Rising headline inflation rate and weakening local currency continue to impact real return on investment amidst heated combat for attracting investable funds between equity and fixed income markets. READ: Stocks Tumble as Nigerian Exchange Reverses Uptrend
Last week, fixed interest asset investors flooded the secondary market to put their funds in the short and mid-segment of the curve after lost bids in the auction conducted by the Central Bank of Nigeria last week, according to analysts’ notes.
In its market report, Cordros Capital analysts told clients via email that the buoyant system liquidity triggered bullish sentiments in the T-Bills secondary market.
Consequently, the average yield across all instruments dipped by 40 basis points to 10.5% – a resultant effect of pumping investable funds into the gilt-edge market instruments.
Across the market segments, market analysts and traders said the average yield contracted by 50 basis points to 10.6% in the NTB segment and declined marginally by 2 basis points to 10.2% in the OMO bills secondary market.
At the midweek auction conducted by the apex bank, the CBN offered N193.03 billion – N21.15 billion of the 91-day, N32.83 billion of the 182-day, and N139.06 billion of the 364-day – in bills.
Fixed income traders said in their separate notes that demand was higher, recording a total subscription level of N520.92 billion with more demand skewed towards the longer-dated bills with large bet worth N499.42 billion- translating to 95.9% of the total subscription.
Eventually, the CBN allotted N310.12 billion – N4.52 billion of the 91-day, N5.44 billion of the 182-day, and N300.16 billion of the 364-day bills – at respective unchanged stop rates of 6.50%, 8.05% and 13.99%, a decline from 14.50% printed earlier.
“With system liquidity expected to be tight in the coming week, we anticipate an increase in the average yield on T-bills from current levels”, Cordros Capital stated. # Yield on Nigerian Treasury Bills Reverses Uptrend