Yield on T-Bills Trend Higher as Naira Tumbles
Godwin Emefiele, CBN Gov

Yield on T-Bills Trend Higher as Naira Tumbles

The average yield on Nigerian Treasury Bills trends higher on Monday amidst sell pressures. In the investors’ and exporters’ foreign exchange window, the Nigerian naira tumbles amidst dollar scarcity.

Last week, MSCI hinted about a possible downgrade of Nigerian Indexes due to the inability of foreign investors to repatriate foreign currencies. The Central Bank of Nigeria had initiated measures to control flows of dollars to stem the naira from falling further. However, the inability of foreign investors to move out funds has raised the FX backlog.

At the official window, the naira depreciated by 0.2% to N421.00 on Monday, according to data from FMDQ Exchange, though the exchange rate steadies at N605 per dollar at the parallel market. 

In the money market, the overnight lending rate was flat at 14.0%, a position that Cordros Capital analysts attributed to the absence of any significant funding pressure on the system.

Recall MarketForces Africa reported that liquidity squeeze in the financial system had put pressures on the open buy back rate and overnight lending rate, thus lifting the short-term rates to double-digit on Friday.

Today, trading activities in the Nigerian Treasury bills secondary market were faced with sell pressures following deposit money banks’ decision to unload bills to meet liquidity demand last week. READ: Oil Tumbles 3% over Weak Economic Data in US, China

Due to the bearish sentiments, the average yield expanded by 27 basis points to 5.1%. Across the curve, Cordros Capital analysts said the average yield expanded at the short (+28bps), mid (+76bps), and long (+1bp) segments.

Traders attributed this to market participants’ decision to reduce holdings by selling off the 45-day to maturity (+86bps), 108 day to maturity (+139bps), and 213-day to maturity (+8bps) bills, respectively.

Elsewhere, the average yield remained flat at 5.2% in the open market operations (OMO Bills) segment, according to Cordros Capital market report. Also, trading activities in FGN Bonds secondary market were bearish, as the average yield inched higher by 3 basis points to 11.1%.

Across the benchmark curve, traders stated that the average yield expanded at the short (+1bp) and long (+5bps) ends as investors demanded the APR-2023 (+13bps) and JUL-2045 (+54bps) bonds, respectively. The average yield was flat at the mid-segment. # Yield on T-Bills Trend Higher as Naira Tumbles