The average price of Nigerian Treasury bills fell in the secondary market ahead of the primary market auction (PMA), as investors raised their position in anticipation of lower spot rates on standard offers.
Due to speculation that the monetary authority will alter spot rates across standard maturities at the primary market auction, fixed income asset traders increased their secondary market purchases of Treasury bills.
The market witnessed the average mid-rate plummet due to low demand in bills across the short, belly, and long tenors. The average yield fell by 19 basis points to 20.9% in the market. The Central Bank of Nigeria (CBN) is set to hold a main market auction midweek.
Investment banking firms revealed in their separate notes that the CBN would be offering T-bills worth N233.31 billion to investors in the primary market auction today. Mirroring the current mood, analysts projected that spot rates could drop as they were with the OMO auction.
The Nigeria’s Debt Management Office (DMO) that is going to conduct the auction on behalf of the CBN has been unwilling to increase rates as part of efforts to reduce government borrowing costs.
Analysts said rates have been slowing down, reversing the previous trend with the hope that disinflation condition will be sustained throughout the remaining part of the year. They anchored their expectation on elevated yield in the market and recent inflation rate slowdown which has reduce negative interest yield in the fixed interest securities market.
In a note, Cordros Capital Limited said the average yield declined at the short (-1bp), mid (-1bps), and long (-39bps) segments. The yield contraction was driven by demand for the 65-day to maturity (-1bp), 156-day to maturity (-2bps), and 233-day to maturity (-270bps) bills, respectively.
Meanwhile, the average yield pared by 1 bp to 22.8% in the OMO bill segment after the primary market auction earlier in the week.
“We expect the outcome of the Treasury bills auction and liquidity to impact the market,” AIICO Capital Limited said in a note. On Tuesday, the Nigerian Interbank Treasury Bills True Yield (NITTY) trended downward across all maturities.
