According to traders’ notes, a recent selloff of Nigerian Treasury bills (NTB) has prompted a further increase in the benchmark yield in the secondary market for fixed interest assets.
Market players who lost bids at the Central Bank of Nigeria’s (CBN) Treasury bills auction flocked to the secondary market to increase their portfolios after the spot rates at the auction decreased.
But when the financial system’s liquidity increased, there was a change in the trading pattern. Based on information from FMDQ Securities Exchange, a greater degree of liquidity has caused short-term interest rates, or financing rates, to drop below thirty percent.
With no discernible impact on the money market’s liquidity situation, the overnight lending rate dropped by 258 basis points to 28.4%.
As a result, demand for funding among banks decline as N35 billion worth of OMO bills become matured, raising the total liquidity in the market.
Having stayed above 30% for long, key money market rates, such as the open repo rate (OPR) and overnight lending rate (OVN), retreated to 27.63% and 28.42% as the ease in funds demand, Cowry Asset Management Limited told investors.
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Traders at Cordros Capital Limited told investors that activities in the T-bills secondary market remained bearish on Thursday. The selloffs caused the average yield to expand by 21bps to 22.4%.
The investment banking firm said across the curve, the average yield declined at the short (-3bps) and mid (-2bps) segments. The yield contraction at the short end following interest in the 70-day to maturity (-3bps) and 175-day to maturity (-2bps) bills, respectively.
However, yield advanced at the long (+46bps) end of the curve as players took profits off the 217-day to maturity (+192bps) bill. Elsewhere, the average yield dipped by 2bps to 18.7% in the OMO bills segment in the secondary market.
