Yield Rises as Treasury Holders Offload Bills

Yield Rises as Treasury Holders Offload Bills

The average yield on Nigerian Treasury bills (NTB) declined as holders offloaded sizeable amounts from their respective portfolios following liquidity tightness seen in the financial system.

Short-term rates adjusted upward to double digit levels in the money market after the financial system was debited for subscription sum for FGN Bonds by investors.

For this week, analysts are projecting liquidity pressure to continue in the financial system as the Central Bank of Nigeria plans to hold the primary market auction.

The CBN is expected to roll over N213.43 billion worth of instruments which will also be debited to the tiny liquidity in the market – which closed around N16 billion last week. READ: Yield Jumps as Investors Offload Short-dated Treasury Bills

The outflow will eclipse the sum expected to flow in from FGN Bond coupon payments worth N17.87 billion and OMO bills maturities value at N40.00 billion. In the just concluded week, the OMO space was dry as well, given the zero OMO bills repayment and auction.

At the close of the trading session, the average yield across all instruments expanded by 14 basis points to 10.5%. Last week, activity in the primary market was muted as CBN did not offer Treasury bills.

Then, fixed income instruments investors swooped down on the 6 months maturities in the secondary market, traders said in a note. 

Across the segments, traders at Cordros Capital said the average yield increased by 18 basis points to 10.6% at the Nigerian Treasury bills secondary market but contracted by 2 basis points to 10.2% at the OMO bills segment.

Most fixed income analysts said sentiments in the market turned bearish over low liquidity in the system as investors, including some banks, exited positions across the curve to meet their financial obligations.

“.. We envisage low demand for Treasury bills and a slight expansion in yields from current levels”, analysts said.  Short-term rates surged in the money market, according to traders’ notes amidst a liquidity squeeze.

The overnight rate returned to the double-digit territory, as it expanded by 367 basis points week on week to 16.5%. 

The average system liquidity settled lower, closing at a net short position of NGN16.01 billion as against a net long position of N378.28 billion in the previous week, according to Cordros Capital. #Yield Rises as Treasury Holders Offload Bills

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