Before Wednesday’s main market auction, the average yield on Nigerian Treasury bills increased to 17.2%, according to dealers’ notes. After several spot rate repricings, the yield in the secondary market has stayed high.
According to Afrinvest’s market analysis, the Central Bank held two rounds of Treasury bill auctions in February with a total offer of N1.3 trillion for the 91, 182, and 364-day instruments.
Although it was less than January’s 38.7x, analysts observed that investors’ desire for fixed income instruments was still rather high, with an overall bid-to-offer ratio of 3.3x. The largest buy interest was registered by the 364-day instrument, which had a 4.3x bid-to-offer ratio.
Following, the 91-day instrument saw a bid-to-offer ratio of 1.9x while the 182-day instrument was the least competitive with a bid-to-offer ratio of 0.9x. Overall, stop rates on the 91, 182, and 364-day instruments rose 12%, 10.4%, and 7.5% respectively to 17.0%, 17.5% and 19.0%.
Following the Central Bank interest rate hike in February, analysts are also expecting the market to factor this yield-pushing catalyst into investing decisions in the fixed income market. Investors are expecting the real return gap to reduce as both inflation and interest rates rise together as the economy struggles to keep growing.
Last week’s selloffs in the secondary market caused average yield across all instruments to expand by 49 basis points to close at 17.4%, Cordros Capital Limited said in a weekend market update. Investment analysts attribute this performance to a dampened interest in bills as market players took profits off positions across mid- and long-dated instruments.
Across the market segments, the average yield advanced by 57 basis points to 17.2% in the Nigerian Treasury bills segment and increased by 19 basis points to 18.0% in the OMO bills secondary market.
The investment firm analysts now anticipate an upward movement of yields in the T-bills secondary market in the new week. In addition, the CBN is scheduled to hold a Treasury bills auction on Wednesday, where it is expected to roll over maturing bills worth N337.89 billion.
