The attitude toward Nigerian Treasury bills continues to swing as investors notice that the central bank has continued to cut interest rates at its key auctions. The yield rose ahead of the Central Bank of Nigeria’s (CBN) policy committee’s announcement on benchmark interest rates on Tuesday. Analysts predict the monetary authority to maintain the interest rate constant, assuming no surprises.
According to AIICO Capital Limited, the average yield in the Treasury bills secondary market increased by 8 basis points to 19.52% as selloffs occurred across the short, belly, and extended ends of the curve. In contrast, the average yield expanded by 19 basis points to 23.6% in the OMO bills segment. Investors have been raising bets on the naira assets due to elevated yields on the fixed-interest securities instruments.
According to analysts, the slowdown in the inflation rate has helped push the real return on investment in government borrowing instruments higher. Even though interest yield remains negative, the gap has narrowed amidst expectation that the central bank will likely keep the benchmark interest rate at 26.75% this week.
The real return on investment has reduced to 6.4% as inflation (33.15%) continues to reduce month on month versus the interest rate benchmark (26.75%). But the disinflation has nudged the apex bank to reduce spot rates across standard maturities in the past Treasury bills auction sales.
Analysts expect the authority to maintain rate slicing, especially at the long end of the curve amidst fluctuating liquidity in the financial system. Fixed income market analysts anticipate a quiet showing tomorrow as participants await the outcome of the MPC meeting.
