Nigeria: Treasury Bills Rates Crash, Demand Declines

In the secondary, the average yield on Nigerian Treasury bills declined further as investors intensified bill buying, dragging yield lower despite rising headline inflation and declining stop rates. High inflation has clouded real return on investment in the fixed income market, generally.

Most of the market participants in the secondary market traded cautiously while the Treasury bills market ended the week on a calm note. Fund/Asset Managers were noted to have directed their attention toward the primary auction conducted on Wednesday where the CBN offered N34.54 billion worth of Nigerian T-bills for subscriptions.

The offer was split into N1.01 billion for the 91-day bills, N1.29 billion for the 182-day bills, and N32.15 billion for the 364-day bills. Stop rates at the June Nigerian Treasury bills auction conducted by the apex bank decreased, Futureview analysts said in a note to investors at the weekend.

In its investors brief, Cordros Capital Limited told investors that the total subscription level settled at N286.13 billion compared to N830.19 billion at the previous auction, with more demand skewed toward the longer-dated bills

Fixed income analysts reported that the primary market auction on June 14, 2023, saw a significant subscription at the 182-day and 364-day tenors, resulting in lower stop rates. The stop rate for the 182-day fell to 5.12% and the 364-day dropped to 8.24%, while the 91-day rate increased slightly to 4.89% compared to the previous auction.

The CBN auction results showed that 182-day and 364-day received subscriptions of N7.27 billion and N277.27 billion, respectively, exceeding the offered amounts of N1.28 billion and N32.15 billion.

The 91-day was slightly oversubscribed at N1.58 billion against N1.10 billion offered. The strong demand for short-dated instruments is expected to continue due to ongoing signals of prolonged elevated inflation, Futureview analysts said.

In the money market, short-term benchmark rates: the overnight lending rate closed flat at 12.1% in the absence of significant inflows into the financial system. Accordingly, the average liquidity level closed lower at a net long position of N233.86 billion as against the net long position of N543.14 billion in the previous week.

Futureview envisages an upward shift in the overnight lending rate as analysts believe the debits for next week’s FGN bonds auction and possible CRR will mount pressure on system liquidity.