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The average yield on Nigerian Treasury bills experienced a 21 basis points decline on Monday as investors actively participated in buying activities within the secondary market. This move comes in the wake of a recent inflation uptick to 31.70%, marking a 1.80% rise from January’s figures.
Investors turned to Treasury bills in the secondary market to offset lost bids from the previous week’s primary market auction, where the Central Bank of Nigeria (CBN) offered a size significantly below the N1.5 trillion subscription level placed by investors. This departure from previous auction sales was notably influenced by the absence of bids from foreign investors.
Analysts noted that the reduced allotment of N160 billion in the last auction stemmed from the absence of bids from foreign investors, contrasting with earlier instances where foreign interest was evident. Consequently, the CBN adjusted spot rates across 91-day, 181-day, and 364-day bills allotted to investors during the auction.
Despite prevailing high inflation conditions, yields remained elevated, albeit with interest yield still registering as negative. Investors anticipate a potential narrowing of this gap with the expected higher returns on fixed interest securities. The influx of last week’s lost bids into the secondary market led to increased demand for Treasury bill instruments, fostering a positive sentiment in the treasury asset.
The optimistic sentiment surrounding treasury assets influenced the yield curve, with the average yield contracting by 21 basis points to 18.5%. Notably, the average yield decreased across the short (-2 bps), mid (-24 bps), and long (-29 bps) segments, according to Cordros Capital Limited.
Fixed-income investors capitalized on opportunities in various bill maturities, resulting in declines in average yields for bills nearing maturity. Similarly, the average yield in the OMO bills segment of the secondary market dipped by 4 basis points to 18.8%.
However, the FGN bond secondary market traded with bearish sentiments, with the average yield expanding by 9 basis points to 18.4%. Cordros Capital Limited observed yield increases across certain benchmark bonds, particularly at the short and long ends of the curve.
In the money market, short-term benchmark interest rates saw declines as liquidity pressure eased, with the overnight lending rate contracting to approximately 30.5% following FGN bond coupon payments worth N134.66 billion.
Interbank rates exhibited divergence, with the open repo rate rising by 7 basis points to close at 30.36%, while the overnight rate settled at 30.46%, marking a decline of 61 basis points.
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