Yield on Treasury Bills Plunged as Investors Adjust Holdings
The average yield on Nigerian Treasury bills plunged on Monday as investors strive to rebalance their holdings after an oversubscribed primary market auction last week.
There was a mixed outturn in the secondary market space as treasury investors sold short-dated bills while positioning around the mid and long end of the curve.
With headline inflation rate moderation, some analysts told MarketForces Africa that yield would likely close lower in 2021 following fiscal authority decision to make Eurobond calls to avoid crowding out corporates issuance in the local debt market.
Due to robust financial system liquidity, short term rates sloped downward, according to data from the FMDQ Exchange platform.
The average interbank rate dipped by 550 basis points to 15.03% following contractions in both the Open Buy Back and Overnight rate to close at 12.50% and 13.00%, respectively. The Open buy back rate sinks heavily by 550 basis points just as the overnight lending rate declined at the same rate.
Cordros Capital hinted that the slowdown in the overnight lending rate was a result of the absence of significant funding pressures on the system.
On Monday, activities at the Nigerian Treasury bills secondary market traded on mixed sentiments as the short end of the curve climbed by 33 basis points while the mid and long end of the curve dropped by 16 and 19 basis points.
Consequently to the bullish trade pattern spotted, the average yield slowed down by 14 basis points to close at 5.34% amidst cold trading outturn in the fixed income market.
After Debt Management Office (DMO) primary market auction last week, activities at the Federal Government of Nigeria bond secondary market was quiet today as investors are processing the trend in the space.
Analysts at Alpha Morgan Capital said in a report that there was a slight contraction of 1 basis point at both the short and mid ends of the curve as investors’ demand for the MAR-2025 while the long end of the curve remained flat.
As a result, the average yield dropped slightly by 1 basis point to close at 11.27%.
Elsewhere, analysts spotted a bearish trading signal in the Eurobond market following an expansion across all instruments. In sum, the average yield climbed slightly by 2 basis points to close at 6.59%.
Meanwhile, in the open market operations bill auction conducted by the apex bank last week, there was heavy interest on 341-day bills as subscriptions came at N37.50 billion, more than three times above N10 billion offered. Spot rate on the long-dated bill closed at 10.10%, on 187-day tenor at 8.50% while 96-day ended at 7%.
Across the benchmark curve, Cordros Capital hinted that the average yield expanded at the short end as investors sold off the 73-day to maturity while investors demanded 192-day to maturity. Similarly, the average yield declined by 29 basis points at the open market operations (OMO) segment to 6.1%.
Opening market liquidity was reported at N168.6 billion on Friday while overnight and repo rates closed within a range of 13.0-18.5%. Last week, the average Nigerian Treasury bills yield increased by 10 basis points week on week to close at 5.5%. #Yield on Treasury Bills Plunged as Investors Adjust Holdings
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