Regardless of market conditions, the return on Nigerian Treasury notes has always fallen below the average inflation rate. In the secondary market on Wednesday, the average yield on Nigerian Treasury notes declined 13 basis points to 6.16% as purchase activity rose.
According to Cordros Capital Limited, the average yield remained steady in the short and mid sectors but declined (-29bps) at the long end due to purchase activity in the 232 days to maturity notes, which shed 90 basis points.
Similarly, dealers indicated in their notes that the average yield on open market operations (OMO) decreased 45 basis points to 10.9%.
Investors ramped up purchases of short-term money market instruments amidst hope of strong economic performance in 2024. However, there is another angle to surging demand for Treasury instruments despite its associated inflation-exposed return on investment.
Banks and other authorised dealers remain major market movers in the space rather than retail investors with moderate funds. MarketForces Africa reported that in 2023 deposit money banks’ attention was shifted to debt instruments as lending became more risky.
The liquidity level in the money market has allowed the authority to reprice rates on primary market auctions. A slew of fixed income market analysts expects yield repricing to commence in the first quarter of 2024 as the government begins to implement a borrowing plan.
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), witnessed a surge, closing at 15.46% and 16.00%, respectively, traders said in separate notes. Naira Lost 11% as Banks Issue New Update on FX Spending
Banks and other institutional investors are expected to keep the race at the local debt capital market on track in 2024 as inflation and economic uncertainties persist.
At the latest primary market NTB auction held last week Wednesday, the CBN offered N67 billion but allotted N317 billion worth of NTBs to market participants.
The stop rates changed across the three tenors; the 91-day bill was sold at 7.00% from 6.25%, the rate on 182-day bill declined to 10.00% from 11.00% and 364-day bills was priced down to 12.24% from 13.50%.
