Yields Straighten Ahead of CBN Treasury Bills Auction
In the secondary market today, the average yield straighten ahead of the Central Bank of Nigeria (CBN) primary market auction on Wednesday. At the auction schedule for tomorrow, existing Treasury bills valued at N51.49 billion will mature and roll over according to plan across tenors.
A sum of N8.44 billion maturing from the 91-day bill, N16.06 billion from 182-day and N27.00 billion across will mature and be rolled over on Wednesday.
With robust liquidity in the financial system, analysts have predicted that the spot rate on 364- day instruments could see a moderation, while rates on mid-tenor are expected to be sustained.
Yields on fixed income instruments have been on the downward trend since June following Atlass Portfolio analysts prediction as Nigeria’s inflation rate reversed uptrend.
At the last auction conducted, the average stop rate further declined to 4.73% from 4.89% largely driven by a decline in stop rate on the 364-day instrument from 8.67% to 8.20%, Meristem Securities said in its market report.
However, rates on the short (91-Day) and medium (182-Day) end of the curve remained unchanged at 2.50% and 3.50% respectively. Meristem Securities analysts projected in its second-half outlook for 2021 that liquidity level, and then demand pattern would determine spot rate movement.
Today, the financial system liquidity stays okay for the market, resulting in a further slowdown in interbank rates. The overnight lending rate fell by 25 basis points to 13.5%, following inflows from open market operations (OMO) maturities worth N80.00 billion, Cordros Capital said in its market report.
Meanwhile, the Nigerian Treasury Bill secondary market closed with bullish sentiments as the average yield rested at 5.6%.
Across the benchmark curve, average yield declined 4 basis points at the mid and a basis point in the long segments following market participants’ demand for the 107 days to maturity bills with 5 basis points drop and 212-day to maturity recording a 3 basis point slide respectively.
However, Cordros analysts said the average yield was flat at the short end. Similarly, the average yield at the OMO segment tapered by 4 basis points to 7.6%.
Also, trading in the Treasury bond secondary market was mixed, albeit with a bullish tilt, as the average yield shed 6 basis points to 11.8%, according to Cordros Capital report.
Similarly, average yield contracted at the mid (-1bp) and long (-15bps) segments following demand for the JUL-2030 (-5bps) and JUL-2045 (-48bps) bonds, respectively.
Conversely, analysts spotted a reverse as average yield expanded at the short end (+2bps) due to the sell-off of the APR-2023 (+20bps) bond.
According to analysts at Meristem market report, the strong investors’ demand on the 364-day instrument continues to put downward pressure on the stop rate in that maturity segment.
“This has also influenced the FGN’s appetite for raising debt at that maturity segment as 97% of the total allotment was raised from the 364-day instrument against 92% at the previous auction.
“In the coming auction, we expect the rates of the 91- and 182-Day instruments to remain unchanged given previous trends. However, we expect further moderation in the rate on the 364-Day instrument, as investors’ appetite is expected to remain strong”, Meristem said.
Meanwhile, analysts said the secondary market has continued its bullish run since the last auction, as average T-bills yields fell to 5.35% as of 9th August 2021 from 11.36% from the last auction date.
Read Also: Nigerian Treasury Bills Market Records Strong Demand
It was noted that investors had rallied in the secondary market to fulfil unmet demand at the primary market auction – especially on the long end of the curve. Even so, analysts said the real rates of return remain entrenched in the negative territory despite the recent disinflation.
Yields Straighten Ahead of CBN Treasury Bills Auction
