The average yield on Nigerian Treasury notes fell in the secondary market due to increasing demand for naira assets notwithstanding the negative interest rate. Because of high returns, investors have shifted their focus away from the equity market and onto fixed income investments.
The Central Bank of Nigeria’s (CBN) monetary policy tightening, which has resulted in a 7.5% increase in interest rates in less than five months, has once again impacted market dynamics, as seen by bill pricing at its weekly auctions.
Inflation has continued to hurt investment funds. Despite this, the local debt capital market continues to draw market players, as some investors point out that it costs money to hold money in non-interest-bearing accounts.
According to traders note, the average yield on Nigerian Treasury bills declined by 19 basis points to 20.72% in the secondary market after midweek auction. In its market update, Cowry Asset Management Limited told investors that there was strong buy sentiment for the AUG-2024 instrument, which saw a 254bps decrease in yield.
Explaining further, Cordros Capital Limited told Investors via email that across the curve, the average yield dipped at the short (-43bps), mid (-1bp) and long (-2bps) segments.
Fixed income market analysts attributed that contraction to buying interest in the 91-day to maturity bills (-254bps), 182-day to maturity bills whose yield pared by 1bp and 336-day to maturity which recorded 2bps yield bump. Similarly, the average yield declined by 5bps to 20.9% in the OMO bills segment in the secondary market.
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In the money market, short term benchmark interest rate climbed due to liquidity pressures that followed outflow for Nigerian Treasury bills auction.
The overnight lending rate expanded by 169 basis points to 32.3% as N130.00 billion debited against the system for Treasury bills auction sold to market participants caused liquidity level to drop sharply.
Data from FMDQ Securities Exchange showed that the Open Repo Rate (OPR) and Overnight Lending Rate (OVN) increased, closing at 31.72% and 32.34%. Meanwhile, the FGN bond secondary market traded quietly, as the average yield was unchanged at 18.6%.
Traders said across the benchmark curve, the average yield expanded at the short (+1bp) end as market participants sold off the MAR-2025 (+2bps) bond but remained unchanged at the mid and long segments.
