Yield Rises to 6.4% as Banks Sell T-Bills to Meet Liquidity Demand
The average yield on Nigerian Treasury Bills (NTB) rises sharply, up by 69 basis points to 6.4% on Tuesday while thin trading activities on Federal Government (FGN) bonds keep prices steady.
Banks unload investment securities books to meet their short-term liquidity requirement while trying to balance their position in the standing lending facility. Market liquidity position remains tightened with swarms of rate adjustments in short-dated financial instruments across the investment space.
In the money market segment, there was a slight liquidity pressure in the financial system. This triggered an increase in short-term rates. Data from FMDQ Exchange shows that the average interbank rate climbed by eight basis points to close at 14.00% on Tuesday.
This comes as the Open Buy Back rate expanded by 17 basis points to 14%, according to Alpha Morgan Capital while the overnight rate remained flat at 14%. Today, trading activities at the Nigerian Treasury Bills secondary market closed on a bearish note as banks sold off the short to mid-dated papers to create liquidity.
Consequently, the average rate inched up by 69 basis points due to large selloffs witnessed in the fixed income market. In the open market operations (OMO Bills) segment, the average yield expanded by 30 basis points to 6.0%, according to traders’ notes.
Bond space was however quiet as market participants showed little interest in trading the Federal Government bonds securities. Trading activities was mixed, while the average yield remained flat to close at 11.21%. READ: Yields Rise as Sell Pressures Hit Bonds, T-Bills
Across the benchmark curve, Cordros Capital reported that the average yield was flat at the short end but inched higher at the mid (+1bp) segment. This happened as investors sold off the FEB-2028 (+5bps) bond, traders said in a note.
Conversely, the average yield contracted slightly at the long (-1bp) end following demand for the MAR-2050 (-17bps) bond, according to fixed income analysts’ note reviewed by MarketForces Africa.
Elsewhere, buying interest on FGN Eurobond was however strong today amidst an expectation that the naira will be devalued due to pressures on the exchange rate. As a result of the bullish moves, the average yield on FGN Eurobond instrument traded declined by 7 basis points to 12.75%. #Yield Rises to 6.4% as Banks Sell T-Bills to Meet Liquidity Demand
