Yield Slumps over Sustain Treasury Bills Buying

Yield Slumps over Sustain Treasury Bills Buying

Robust liquidity in the financial system continues to sustain Nigerian Treasury bill (NTB) buying by deposit money banks, and asset/fund managers amidst widening real return on naira assets.

The average secondary market yield on T-bill yields dipped, dropping to 6.18%, down about 42 basis points, led by buy interest on the 08 Jun 23 and 08 Feb 24 Treasury bills, traders said in their market reports.

The market has seen increased exposure to an inflation rate surge while the apex bank priced down spot rates on issuance in its last week’s primary market auctions. Deposit money banks have stopped selling their holdings to close the liquidity gap.

Borrowing by liquidity tasty local lenders from the Central Bank of Nigeria (CBN) standing lending facility (SLF) has also been paused ahead of possible cash reserve requirements debits.

In the money market, short-term benchmark rates: the open repo rate, and the overnight lending rate, declined 100 basis points to 11.75% and 75 basis points to 12.50% on Wednesday, according to data from FMDQ Exchange. 

Bullish sentiment has persisted in the Treasury bills’ secondary market, dragging the yield curve downward. The average yield curve has been nosediving since the last quarter of 2022, with intermittent uptick whenever banks unload their portfolios.

While Nigeria’s inflation rate surged to 22.22% in April, returns on Treasury bills continue to drag, falling at the back of robust liquidity in the financial system. Market participants maintain an expectation of yield repricing in the second half of the year when the new government settles down.

Based on trading records, analysts at Cordros Capital Limited said in its market brief that across the curve, the average yield declined at the short (-228bps), mid (-9bps), and long (-39bps) segments.

Market analysts attributed the decline to buying interests on the 8-day to maturity (-228bps), 99-day to maturity (-109bps), and 25-day to maturity (-143bps) bills, respectively. # Yield Slumps over Sustain Treasury Bills Buying

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