Yields on T-Bills Nears 10%, Bonds Spikes to 14%

Yields on T-Bills Nears 10%, Bonds Spikes to 14%

Yields on T-Bills Nears 10%, Bonds Spikes to 14%

The average yield on Nigerian Treasury bills spikes to 9.9%, according to Cordros Capital analysts’ notes after spot rates upward adjustments at the Central bank of Nigeria auction last week.

Yields have been projected to spike further in the fourth quarter of 2022 as the Nigerian government ramps up borrowings. Inflation worries and worsening exchange rate apart from intermittent movement in system liquidity is expected to impact transactions on government instruments.

Analysts told MarketForces Africa that money pricing dynamics have altered after 400 basis points benchmark interest rate hikes, noting that liquidity squeeze has been impacting trading activities in the fixed income market.

In the bond market conducted this week by Debt Management Office, subscription levels weakened as the apex bank tighten its nose on its discount window after it observed that authorised dealers – banks and other financial services players – engage in sharp practices.

Pressures on the financial system liquidity continue to impact short-term money pricing rates, which are at double-digit mid-high, according to data from the FMDQ Exchange platform.

Market analysts at Cordros Capital Limited told clients via email that the overnight lending rate remained at 16.5%, as the average system liquidity remained at a net short position, closing at N128.20 billion on Tuesday.

Meanwhile, the Nigerian Treasury bills secondary market traded with bearish sentiments, as the average yield expanded by 258 basis points to 9.9%, Cordros Capital told its clients. 

Across the curve, analysts stated that the average yield was flat at the short end but expanded at the mid (+225bps) and long (+459bps) segments. READ: Yield on T-Bills Spikes, Bond Slides Small as Naira Falls

Analysts note detailed that market participants sold off the 191-day to maturity (+313bps) and 331-day to maturity (+608bps) bills, respectively.  Elsewhere, the average yield was flat at 10.3% in the OMO bills segment.

In the Bond market, trading activities closed on a bearish note, as the average yield expanded by 27 basis points to 14.0%.

Across the benchmark curve, analysts noted that the average yields expanded at the short (+62bps) and long (+8bps) ends, following profit-taking activities on the APR-2023 (+305bps) and APR-2037 (+59bps) bonds, respectively.

Conversely, the average yield was unchanged at the mid-segment, according to Cordros Capital market analysts’ note.

After Bank of America said the Nigerian local currency is 20% overvalued, the naira traded flat at N441.25 at the Investors and Exporters FX window. # Yields on T-Bills Nears 10%, Bonds Spikes to 14%