The return (yield) on Nigerian Treasury Bills (NTBs) has decreased as investors scrambled to buy newly issued bills. According to investment firms, the average yield on these bills dropped by 57 basis points to 22.60% as investors who missed out on the primary auction rushed to buy them in the secondary market.
The auction, which took place on Wednesday, saw strong demand, especially for the one-year bills, which were offered at a lower interest rate. As a result, those who couldn’t secure the bills at the auction turned to the secondary market, driving prices up and pushing yields lower.
Analysts point out that investor demand for treasury bills remains high, despite the fact that inflation in Nigeria is currently at 34.80%. Many believe that the Central Bank of Nigeria will increase interest rates in its upcoming February meeting to help curb inflation.
However, some experts warn that the Nigerian economy may already be too weak to handle another rate hike. If interest rates increase further, borrowing costs could rise, potentially slowing down economic activities.
The ongoing rally in the treasury bills market is expected to slow down soon due to the tight liquidity situation in the financial system. While some investors have already sold their holdings to lock in profits, others are selectively buying bills with attractive rates.
Investment firm Cordros Capital Limited reported that the average yield on treasury bills declined across various tenors:
- Short-term bills dropped by 1 basis point
- Medium-term bills dropped by 63 basis points
- Long-term bills dropped by 83 basis points
The strongest demand was observed for bills with 14-day, 105-day, and 301-day maturities, which saw yields decline by 2, 173, and 211 basis points, respectively.
Similarly, yields in the Open Market Operations (OMO) segment also dropped by 22 basis points to 27.1% in the secondary market.
In summary, the rush to buy treasury bills has lowered yields, but liquidity shortages in the banking system could slow down further demand in the coming weeks.
 on Nigerian Treasury Bills (NTBs) has decreased as investors scrambled to buy newly issued bills.){kind=link}