The average yield on Treasury notes stayed high due to Nigeria’s harmful inflation conditions, while the fixed income market’s interest rate on naira assets has been steadily declining.
Though there was little activity at the Central Bank of Nigeria’s two OMO auctions, trading on Nigerian Treasury notes concluded on a negative note in the secondary market (CBN).
In order to maximize returns in the secondary market, investors and other asset managers were observed to be rebalancing their portfolios. This included selling short-dated bills and taking profits at both the long and short ends of the curve.
AIICO Capital Limited’s fixed income experts said on Friday that the average mid-rate had risen by 44 basis points over the previous week to 20.20%.
Meanwhile, Cowry Asset Limited said in its note that the Nigerian Treasury’s true yield, NITTY, was in the mixed bag, reflecting the expectation for the Nigerian T-bills auction in the new week, where higher rates and yields are expected at the primary market auction.
The average secondary market yield on T-bills rose due to bearish trading activities, with most pressure on the 34-day to maturity whose yield surged by +129 bps and a few long-dated bills.
Across the market segments, traders stated that the average yield expanded but contracted by 7 basis points to 21.7% at the OMO bills segment.
Based on our expectation of a possible liquidity dearth next week, we anticipate demand for instruments in the Treasury bills secondary market will likely weaken, causing yields in the market to rise further.
The CBN will conduct a primary market where it is expected to roll over N228.72 billion worth of Nigerian Treasury bills maturities on Wednesday. Based on the previous pattern, analysts forecast demand to remain strong with a moderate adjustment to spot rates.
