Amidst an ongoing recovery in exchange rates in the FX markets, the average yield on Nigerian Treasury bills experienced a severe collapse in the secondary market. In the secondary market, the yield fell by 1.14% on average.
There has been a seesaw movement in yields since the central bank cut rates on Treasury bills last week, since inflation reduces the return on investment. Investors in portfolios have been driven by shifting market dynamics to rearrange their holdings while monitoring potential catalysts for yield repricing.
a lot of money in use pushed the Treasury bills of the Central Bank of Nigeria (CBN), raising the price of the tickets; nevertheless, unexpectedly, the allocation at the just finished Treasury auction slowed down. The move by the top bank to lower allocation, according to some traders, might not be unconnected to the absence of foreign investors’ demand for government short-term instruments at the main market.
In the money market, the Nigerian Interbank Offered Rate witnessed a universal decrease across all maturities, indicating an improvement in liquidity within the system, Cowry Asset Management Limited said in its market update. Short-term benchmark interest rates adjusted downward as pressure on financial system liquidity eased despite large outflow due to debits for the March 2024 FGN bond auction worth N588.87 billion.
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), nosedived to conclude at 25.67% and 26.58%, respectively. A steep demand for Treasury bills in the secondary market pushed yield lower. According to Cordros Capital Limited, the average yield declined by 114 basis points to 17.3%.
Across the curve, the average yield contracted at the short (-24bps), mid (-114bps) and long (-169bps) segments, traders said in their separates market update. The yield contraction followed investor interest in the 36-day-to-maturity bills, whose yield plunged by -52 bps.
The market also sees buying momentum growing on 127-day to maturity, causing a 180-bps decline in its associated yield line, while demand for 323 days to maturity drags its yield down by 342 bps. Likewise, the average yield pared by 1 bp to 18.8% in the OMO bill segment in the secondary market.
Elsewhere, sentiments in the FGN bond secondary market were bearish. The selloffs on naira assets dragged return downward after primary market auction sales on Monday. According to information from the bond market, the average yield expanded by 29 basis points to 18.8%.
Across the benchmark curve, traders reported that the average yield advanced at the short (+68 bps), mid (+37 bps), and long (+6 bps) segments. The yield surge was due to profit-taking activities on the APR-2029 (+100bps), APR-2032 (+116bps), and JUN-2053 (+60bps) bonds, respectively.
At the official window, the naira appreciated by 4.6% to N1,492.61, a similar trend witnessed in the parallel market as an effort to boost FX liquidity raised market confidence.
