As investors in fixed interest instruments liquidated their holdings in the secondary market, the average yield on Nigerian Treasury bills increased significantly, rising by more than 6%.
Amidst concerns about inflation and the prospect of future interest rate hikes, trade activity closed negatively due to the risk-off mood sparked by the liquidity crisis and other market-related factors.
Because of the demand on liquidity that we saw last week, money market rates increased dramatically. The benchmark short-term interest rate increased to more than 30% as a result.
After settling obligations for the net NTB issuances of N802.19 billion and the FGN bond PMA totaling N626.81 billion, the overnight (OVN) rate increased by 18bps to 30.3%.
Investment banking firm Afrinvest Limited noted in its update the market direction was mainly influenced by the drop in market liquidity which was 1.2 trillion short as of Wednesday, April 17.
Some banks and other authorised dealers switched to bearish mood, with selloffs experienced on maturities across the curve. Consequently, average yield expanded 604 basis points to close at 25.17% from 19.13% recorded in the past week, Afrinvest said.
Traders noted that sell-offs were witnessed across all tenors, as average yield expanded by 790bps at the short end, up by 743bps at the belly of the curve and 450bps at the long end, respectively.
The yield on the 09-May-24 (+814bps), 12-Sep-24 (+773bps), and 24-Oct-24 (+656bps) maturities advanced the most, according to traders notes.
On Wednesday, the Central Bank is scheduled to roll over a total of ₦142.57 billion through the NT-bills Primary Market Auction across the 91-, 182- and 364-day Day Instruments.
Analysts at Cordros Capital Limited envisage that possible Treasury bills issuance at the Wednesday auction may offset the expected inflows from FGN bond coupon payments worth N185.55 billion and keep the OVN rate elevated.
Across the market segments, the average yield advanced by 604 basis points to 25.2% in the NTB secondary market and increased by 25 basis points to 18.4% in the OMO segment.
