The rise in demand for money market instruments throughout the short, belly, and long end of the curve in the secondary market resulted in a small fall in the average yield on Nigerian Treasury notes.
Some observers predict that the central bank would raise the benchmark interest rate ahead of inflation statistics in order to support the rising consumer price index. March had a 30-year high of 33.20% for inflation, but forecasts indicate that bad macroeconomic conditions will make pricing pressures worse in April, May, and June of 2024.
There was an increase in betting on Nigerian Treasury notes notwithstanding the financial system’s low liquidity. Information from FMDQ Securities Exchange indicates that as financing constraints increased, short-term benchmark interest rates increased.
The overnight interbank borrowing rate rose by 1.07% to close at 29.18% signaling system illiquidity, said Cowry Asset Management Limited in an update.
Likewise, Key money market rates, such as the open repo rate (OPR) surged by 116 basis points to 28.59%, according to data from FMDQ platform.
Also, the overnight lending rate expanded by 100 basis points to 29.47%, amid debits for the OMO auction worth conducted by the Central Bank of Nigeria on Monday where a total of N260.65 billion was allotted to market participants.
With expectation to boost returns, investors raised bets on Treasury bills in the secondary market. The move dragged yield curve downward. Traders said the average yield contracted by 4 basis points to 22.5%.
In its market update, Cordros Capital Limited told investors that the average yield declined at the short (-2bps), mid (-1bp) and long (-7bps) segments. The yield contraction was driven by investors’ interest in the 65-day to maturity (-2bps), 170-day to maturity (-1bp) and 233-day to maturity (-40bps) bills, respectively.
Similarly, the average yield pared by 1bp to 18.7% in the OMO bills segment in the fixed interest securities market on Tuesday, according to traders.
