Yield on T-Bills Dips Ahead of Auction, MPC Decision
Godwin Emefiele, CBN Gov

Yield on T-Bills Dips Ahead of Auction, MPC Decision

Following a moderate buying momentum in the secondary market, the average yield on Nigerian Treasury bills (NTB) declined ahead of the midweek auction and monetary policy committee decision on the benchmark interest rate.

The Central Bank of Nigeria (CBN) is expected to conduct a primary market auction on Wednesday and analysts are expecting the spot rates to be adjusted upward given a higher inflation rate.

Nigeria’s jumpy inflation rate has widened the real return on government securities. In addition, a weak local currency has made real return on fixed interest instruments unimpressive due to negative real return on naira assets.

In the money market, short term interest rates declined as liquidity in the system improved. Market data showed that the overnight lending rate contracted by 200 basis points to 13.6%.

Inflows from FGN bond coupon payments worth N26.20 billion supported the robust liquidity in the market. Due to the funding profile, analysts expect demand at the CBN auction to come solid.

This is expected to impact spot rates pricing despite changing money dynamics. Given the bullish activities in the Treasury bills secondary market yesterday, the average yield contracted by 13 basis points to 6.9%, Cordros Capital Limited said in its market note.

Across the curve, analysts stated that the average yield closed flat at the short and long ends but contracted at the mid (-46bps) segment following buying interests on the 115-day to maturity (-183bps) bill.

Elsewhere, the naira depreciated by 0.1% to N463.50 per United States (U.S) dollar at the Investors’ and Exporters FX window. #Yield on T-Bills Dips Ahead of Auction, MPC Decision Naira Steadies as Banks Issue Update on FX Purchase