In anticipation of March 2024 inflation figures, investors made huge subscriptions to long-term Treasury notes issued in the primary market auction, prompting the Central Bank of Nigeria (CBN) to reduce the interest rate.
Despite central banks’ efforts to combat inflation, economists at Broadstreet believe that inflation will surpass 32% in March. In March, the CBN policy committee increased the benchmark interest rate to 24.75% in an effort to stabilize Nigeria’s deplorable inflation figures.
The National Bureau of Statistics (NBS) is anticipated to release March inflation statistics this coming week. The lagging indicator is anticipated to continue rising during the year’s second quarter.
Trading activity on Nigerian Treasury Bills ended the secondary market on a positive note. The market saw a rise in the desire for short-term fixed interest securities despite large allotment made by the Central Bank.
Traders and market analysts reported that there were pockets of demand particularly at the long end of the curve. There was thin transaction at the belly of the curve. As a result, the average yield across all instruments contracted by 9 basis points to 18.7%, according to a market update from Cordros Capital Limited. Naira Suffers Big, CBN Goes Ballistic Against FX Whales
The investment firm stated in its note that across the segments, the average yield declined by 5 basis points to 18.9% in the NTB secondary market. Elsewhere, the yield on OMO bills dipped by 20 basis points to 18.2% in the OMO segment.
On Friday, the apex bank offered instruments worth N149.63 billion to investors, authorized dealers and other participants at its primary market auction.
The offer size was split into NN2.78 billion for the 91-day treasury bills, N3.02 billion for the 182-day, and N143.84 billion for the 365-day bills.
According to auction results, total subscription came at NGN1.82 trillion, translating to a bid-to-offer ratio of 12.2x. Investment firms said demand skewed towards the longer-dated bill which attracted N1.77 trillion.
The CBN allotted bills worth N951.83 billion across the short, belly and long tenors. Details from auction results showed that CBN sold N27.11 billion of the 91-day at 16.24% – the same rate offered at the previous auction.
The apex bank also allotted 182-day treasury bills worth N22.67 billion at 17%, the same rate offered at the previous auction. The authority sold 364-day bills worth N902.04 billion at 20.70%, 42 basis points below its previous rate of 21.12%.
“Given our expectations of lower liquidity in the system next week, we anticipate participants’ demand for bills to moderate, resulting in an expansion of yields in the secondary market.
“Nonetheless, we do not rule out a possible influx of unmet demand from today’s primary auction to filter into the secondary market in the coming week”, Cordros Capital Limited said in its market update.
