The average yield on Nigerian Treasury notes fell slightly to around 21% as fixed-income investors increased naira assets in the secondary market ahead of the auction.
Meanwhile, the Central Bank of Nigeria (CBN) is scheduled to hold a main market auction on Wednesday to roll over maturities totaling N508.98 billion. A number of analysts have predicted that demand will be robust.
“Given that the system is projected to be flush with cash, we anticipate continued demand for Treasury notes in the space. According to Cordros Capital’s market research, yields in the NTB secondary market are expected to trend lower sequentially.
On Tuesday, the secondary market for Nigerian Treasury Bills was fairly busy and positive, with strong buy sentiments throughout the curve causing a basis point decrease in the average T-bills yield to 20.92%.
Across the curve, the average yield dipped across the short (-1bp) and mid (-1bp) segments due to buying interests in the 51 day to maturity whose yield declined by 2bps and 170 day to maturity with a basis point slide in yield bills.
Meanwhile, yield closed flat at the long end of the curve ahead of primary market auction with expectation for further yield repricing. Elsewhere, the average yield advanced by 3bps to 20.9% in the OMO bill segment in the secondary market.
At the just concluded monetary policy committee meeting of the CBN, benchmark interest rate was adjusted by 150 basis points to anchor inflation rate in the country. The decision has effectively reduce the gap between inflation (33.69%) and benchmark interest rate (26.25%) to 7.44% from 8.45%.
Analysts said this is expected to reflect in naira asset pricing as investors seek inflation protected return on their investment amidst burning inflation.
“While we believe the outcome of this meeting may trigger further rounds of bearish sentiments across the mid-to-long end of the yield curve, we expect tomorrow’s NTB auction to give more clarity on the direction of yields in the secondary market”, Cordros Capital said in its post MPC commentary note.
Analysts said they maintain expectations that yields in the fixed-income market are bound to increase further from current levels on expectation of a sustained imbalance in the supply and demand dynamics in the fixed-income market.
