The inflation data for February 2024 caused a slight reduction in the average yield on Nigerian Treasury bills. Rate repricing is expected to continue following a 4% boost in the benchmark interest rate, which has kept yields high in the fixed-income market.
Investors in the debt market want to counteract rising headline inflation, which has led to a tightening of monetary policy. While Fitch Ratings anticipates the average consumer price index to end the year at 26%, headline inflation is expected to surpass 30%.
The central bank has dramatically increased sales of Treasury bills in an effort to counteract the negative consequences of excess money, in part by luring foreign investors into the country. Liquidity levels in the financial system have been impacted.
According to information from the FMDQ website, the overnight lending rate expanded by 8 basis points to 31.9% in the absence of any significant funding flows into the system. Short-term benchmark rates have adjusted above 30% over the past week as liquidity pressures persist.
Key money market rates, including the open repo rate and overnight lending rate, sustained double-digit high trend, settling at 31.38% and 31.86%, respectively
In the secondary market on Tuesday, trading activities closed with bullish sentiments. Fixed-interest securities raised their portfolio holdings after a selling spree. As a result, the average yield contracted by 3 basis points to 18%.
Across the curve, Cordros Capital Limited told investors in a note that the average yield declined at the short (-1bp), mid (-1bp), and long (-6bps) segments following buying interest in the 86-day to maturity (-1bp), 177 days to maturity (-1bp), and 254 days to maturity (-84bps) bills, respectively.
Traders also added that the average yield increased by 2 basis points to 18.8% in the OMO bills segment in the secondary market. Elsewhere, the FGN bond secondary market activities were mixed, but with a bearish tilt.
Based on trading direction, the average yield remained at 18.0%. Across the benchmark curve, the average yield expanded slightly at the short (+1bp) end as market players sold off the MAR-2024 (+3bps) bond but closed flat at the mid and long segments.
Yesterday, the naira appreciated by 0.90% to close at ₦1,603.38 per dollar at the official market. In the parallel market, the naira closed at ₦1,604 to the dollar. In the global commodity market, oil prices increased, as Brent crude rose by 0.41% to $82.55 per barrel, while WTI crude also increased by 0.47% to $78.30 per barrel.
