Due to modest secondary market buying activity on Monday, the average yield on Nigerian Treasury bills decreased by 21 basis points. The latest spike in inflation to 31.70%—a 1.80% increase from January’s reading—was followed by this market activity.
In order to make up for missed bids at last week’s primary market auction, market players attempted to park money into bills at the secondary market. The magnitude of the Central Bank of Nigeria’s (CBN) offer was much less than the N1.5 trillion subscription level that investors had requested. In contrast, the CBN had previously sold auctions when international investors expressed interest.
“The reason for the lower allotment of N160 billion in the last auction was because foreign investors made no bids versus earlier offers,” analysts told MarketForces Africa. As a result, the CBN slashed spot rates across 91-day, 181-day, and 364-day bills allotted to investors at the auction.
Yields remained elevated as the market confronted high inflation conditions. Still, interest yield remains negative, though investors are expecting the gap to close on the expected higher return on fixed interest securities. Last week’s lost bids filtered into the secondary market, causing increased demand for Treasury bill instruments.
The positive sentiment treasury asset impacted the yield curve. The average yield declined by 21 basis points to 18.5%. Across the curve, the average yield contracted at the short (-2 bps), mid (-24 bps), and long (-29 bps) segments, according to Cordros Capital Limited.
This is a result of fixed-income investors’ bargains in the 80-day to maturity (-3bps), 178-day to maturity (-147bps), and 339-day to maturity (-244bps) bills, respectively. Similarly, the average yield dipped by 4 basis points to 18.8% in the OMO bills segment in the secondary market.
Elsewhere, the FGN bond secondary market traded with bearish sentiments as the average yield expanded by 9 basis points to 18.4%. Cordros Capital Limited stated that across the benchmark curve, the average yield advanced at the short (+2bps) and long (+16bps) ends as players sold off the MAR-2025 (+5bps) and JUN-2038 (+91bps) bonds, respectively.
Meanwhile, the average yield was unchanged at the mid-segment. In the money market, short-term benchmark interest rates declined as liquidity pressure eased. The overnight lending rate contracted by to approximately 30.5%, following the inflows from FGN bond coupon payments worth N134.66 billion.
The interbank rates diverged. The open repo rate rose by 7 basis points to close at 30.36%, while the overnight settled at 30.46%, declining by 61 basis points.
