The average yield rose when the Central Bank of Nigeria (CBN) raised the spot rate on Nigerian Treasury Bills auctioned in the main market. Following a jump in inflation, the central bank sold notes at higher rates to entice investors to enter the market.
Investors’ returns on naira assets have been mostly influenced by rising inflation and interest rate circumstances, although the liquidity situation has maintained the demand level seen at the last auction. This allowed the authority to adjust rates depending on the observed trend.
Traders at Cordros Capital Limited informed clients via email that trading activities in the T-bills secondary market turned negative last week as investors took profits on positions throughout the curve.
Across market categories, researchers noted that the average yield advanced by 333 basis points to 6.7% in the NTB segment but pared by a basis point to 8.4% in the OMO bills secondary market.
At the midweek primary auction, the apex bank offered instruments worth N231.82 billion to investors for subscriptions. The offer was split as N7.85 billion for the 91-day, N6.44 billion for the 182-day, and N217.53 billion for the 365-day bills – to participants.
Total subscription at the auction settled at N1.09 trillion, resulting in a bid-to-offer of 4.7x. According to Cordros Capital, more demand skewed towards the longer-dated bill which attracted N1.04 trillion subscription.
The auction result showed that the CBN allotted precisely what was offered at respective stop rates. Treasury bills for 91-day were sold at 5.00%, rising from 2.44% previously offered to investors. Also, 182-day bills attracted 7.15%, which is a steep increase from 4.22% previously offered to investors.
Long-dated treasury bills instrument for 364-day was closed at 11.54% from 8.40% at the previous auction. In the money market, the Overnight Nigerian Interbank borrowing rate demonstrated a downward trajectory, experiencing a 0.33% decrease to 19.50%, as the system liquidity improved.
Key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN) declined to conclude at 17.58% and 18.83%, respectively, Cowry Asset Limited told investors in an email. Selloffs Provoke Spike in Nigerian Treasury Bills Yield
The overnight (OVN) rate contracted by 442 basis points to 18.83%, as the inflows from the FGN bond coupon payments worth N216.59 billion and CRR refunds totalling N240.00 billion supported financial system liquidity.
Against the preceding, system liquidity settled higher at a net long position of N487.45 billion versus a net long position of N334.16 billion in the previous week.