Following the Central Bank’s monetary policy committee’s 50 basis point increase in the benchmark interest rate on Tuesday, the average yield on Nigerian Treasury bills increased.
Ahead of the primary market auction on Wednesday, July 24, 2024, investors in the secondary market reduced their holdings of Treasury notes in response to the policy committee’s decision.
In order to refinance outstanding bills, the Debt Management Office (DMO) is anticipated to hold primary market auctions on behalf of the Central Bank of Nigeria (CBN). DMO plans to offer ₦277.96 billion at the midweek auction, spread among conventional maturities.
Analysts predicted that spot prices on bills will be changed to reflect increased liquidity in the financial system, which will have a significant impact on subscription levels.
Fixed income analysts explained that the outcome of the auction will set the direction in the secondary market given that last week’s OMO bills auction failed due to investors’ apathy.
Yesterday, the average yield advanced by 22 basis points to 25.1%, Cordros Capital Limited said in its market update. Traders said across the curve, the average yield declined at the short (-1 bp) and mid (-2 bp) segments.
The yield contraction was driven by demand for the 65-day to maturity period, which shed basis points. There was also buying interest on the 156-day maturity, which caused a 2 basis point yield decline.
Market analysts said the average yield expanded at the long (+43 bps) end, driven by sell pressures on the 261-day to maturity, causing its associated yield to rise by +215 bps. Likewise, the average yield increased by 13 basis points to 24.4% in the OMO segment, according to an investment banking firm note.
AIICO Capital Limited told investors in its note that the firm expects the bearish bias to linger as DMO will be offering N277.96 billion in Treasury bills to investors in the primary market.
