Yield Sinks Below 5% After 364-Day T-Bills Spot Rate Falls
Godwin Emefiele, CBN Governor

Yield Sinks Below 5% After 364-Day T-Bills Spot Rate Falls

The average yield on Treasury bills fall below 5% on Thursday in the secondary market a day after the Central Bank of Nigeria primary market auction (PMA) spot rate on 364-day cleared lower.

Some fixed income analysts have predicted further pressures on the spot rate in the primary market auction for long-dated Treasury bills instruments amidst moderation in the headline inflation rate and robust liquidity.

Better financial system liquidity has kept short term interest rates down, the interbank rate dropped off significantly this week to a lower single-digit rate, according to data tracked from the FMDQ Exchange platform.

Today, the average interbank rate declined further by 642 basis points to close at 2.67%. This occurred as both overnight lending and open buy back rates tumbled.

Despite debits for CBN’s weekly OMO auction and net Nigerian treasury bills issuances, the Overnight (O/N) rate decreased by 6.50 per cent to close at 3.00 per cent as against the last close of 9.50 per cent, and the Open Buy Back (OBB) rate decreased by 6.33 per cent to close at 2.33 per cent compared to 8.66 per cent on the previous day.

In the Treasury bill space, trading activities in the secondary market closed bullish as average yield across the curve shrink by 19 basis points to close at 4.91 per cent from 5.10 per cent on the previous day, FSDH Capital note shows.

Analysts spotted that average yields across short-term and medium-term maturities declined by 43 basis points and 32 basis points, respectively. However, the average yield across the long-term maturities remained unchanged at 5.81 per cent.

NTB 26-May-22 (-193 bps) and NTB 24-Feb-22 (-173 bps) maturity bills witnessed heavy buying interest, while yields on 18 days to maturity bills remained unchanged, FSDH Capital said in its market report.

MarketForces Africa reported that the Central Bank of Nigeria held its scheduled Primary Market Auction on November 24, selling Treasury Bills worth ₦215.72 billion.

The total sum was split across the 91-day with ₦2.04 billion allotments made, 182-day did ₦3.78 billion, and ₦209.90 billion was allotted for subscribers for 364-day tenors.

CBN auction result shows that the stop rates for the 91-day and 182-day tenor remained unchanged at 2.50 per cent and 3.50 per cent, respectively. However, the stop rate for the 364-day tenor cleared lower at 5.89 per cent, a 61 basis points lower from the previous close.

The auction was oversubscribed by 251 per cent, with bid-to-cover ratios settling at 2.56x (91-day), 1.04x (182-day), and 3.63x (364-day). Amidst a cold outing in the open market operations market, the average yield across the OMO Bills curve closed flat at 5.50 per cent.

Average yields across short-term, medium-term, and long-term maturities remained unchanged at 5.36 per cent, 5.54 per cent, and 6.15 per cent, respectively, according to FSDH Capital note. In the FGN bonds secondary market, the average bond yield across the curve cleared lower by 22 basis points to close at 8.17 per cent from 8.39 per cent on the previous day.

Average yield across the short tenor of the curve declined by 31 basis points, while the average yield across the medium tenor of the curve expanded by 13 basis points while the average yield across the long tenor remained unchanged.

FSDH Capital said the FGNSB 15-MAY-2022 bond was the best performer with a decrease in the yield of 191 basis points, while the FGNSB 11-DEC-2021 bond was the worst performer with an increase in yield of 135 basis points.

 At FGN Savings Bond Auction for November 2021, the DMO allotted bonds worth ₦418.84 million across the 2-year (₦133.41 million) and 3-year (₦285.43 million) tenors at coupon rates of 7.376 per cent (+48 bps) and 8.376 per cent (+48 bps), respectively.

Allotment for 2-year bonds increased by 100.75 per cent compared to ₦66.46 million allotted in the last auction, and allotment for 3-year bonds increased by 14.65 per cent versus ₦248.95 million allotted in the previous auction.

Elsewhere, trading activities at the FGN Eurobond market traded on a quiet note as the average yield remained flat to close at 7.35%. #Yield Sinks Below 5% After 364-Day T-Bills Spot Rate Falls

Read Also: Investors See T-Bills Yield Repricing as 364-day Spot Rate

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