Despite shifting demand throughout the curve, the average yield on Nigerian Treasury notes remained elevated while tracking at a distance from increasing inflation rates.
Fixed interest securities dealers saw sell pressure on treasury bills in the secondary market midweek, as investors sought to increase liquidity. The quantity in the system varies owing to the outflow of cash from Federal Government of Nigeria auction sales.
The Debt Management Office held a FGN bond auction, and a total of N682 billion exited the financial system as a debt. This reduced the liquidity level, causing money market short-term interest rates to rise further.
According to data received from the FMDQ Securities Exchange website, the overnight lending rate increased by 125 basis points to 31.8% following debits for the May 2024 FGN bond auction.
In its market update, traders told investors that trading in the T-bills secondary market ended on a mixed note with bearish tilt. Investors’ appetite switched.
The sell down in treasury bills asset lifted yield higher. As a result, the average secondary market yield for Nigerian Treasury Bills increased by 0.05% to close at 21.40%, Cowry Asset Management Limited said in its market update. This continue to track below inflation which printed higher at 33.69%.
Traders at Cordros Capital Limited said across the curve, the average yield declined at the short (-1bp) and long (-8bp) ends driven by interests in the 22-day to maturity (-2bps) and 302-day to maturity (-51bps) bills, respectively.
Conversely, the average yield advanced at the mid (+10bps) segment as players took profits off the 162-day to maturity (+33bps) bill. Likewise, the average yield contracted by 1bp to 20.1% in the OMO segment.
In the money market, the overnight interbank rate increased by 0.05% to reach 30.80% due to tightening liquidity conditions. Short-term benchmark rates such as the open repo rate (OPR) and overnight lending rate (OVN), advanced by 1.19% and 1.25% to reach 30.88% and 31.84%, respectively.
