The average yield on Nigerian Treasury bills rose in the secondary market as investors sold naira assets at a time when the Central Bank of Nigeria (CBN) cut the spot rate on one-year bills.
The treasury bill market began the week with a gloomy outlook. During the week, the Debt Management Office (DMO) offered roughly ₦216.09 billion on behalf of the monetary authority to control liquidity.
Investors placed offers worth 2.25 times the amount provided. In the secondary market, the sell-off continued ahead of inflation data expectations. Broadstreet analysts agree that the consumer price index will begin to fall after the July data, citing base effects.
Despite the elevated yield on borrowing instruments, investors in the fixed income market are still looking for catalysts to drive yield repricing. While Nigeria’s yield is high, investors’ money is nevertheless subject to inflationary pressure, earning negative interest on naira assets.
Following Treasury bill selloffs in the secondary market last week, the average yield across all instruments increased by 51 basis points to 25.9%, according to analysts’ separate notes.
Following two failed main market auctions, the average yield jumped to 25.8% in the NTB segment and 87 basis points to 26.1% in the OMO segment. According to the Nigerian Treasury bills auction results, the DMO offered N216.09 billion. The offer was split into conventional maturities.
DMO offered N16.59 billion worth of 91-day Treasury bills to investors, a total of N51.35 billion worth of 182-day and N148.15 billion for the 364-day bills were also offered to investors. Demand at the auction settled at N486.87 billion as against N373.95 billion at the previous auction, which was 2.25times total offering.
The auction closed with the DMO allotting exactly what was offered at respective stop rates of 18.50% for 91-day Treasury bills. The spot rate for 192-day bill was 19.50%. Both rates were unchanged from the previous auction.
However, spot rates for one-year Treasury bills were reduced to 21.89% from the 22.10% clearing rate at the previous auction.
