Following a rate adjustment, the average yield on Nigerian Treasury bills in the secondary market exceeded 25%. Spot rates across standard maturities were mixed in last week’s primary market auction.
The market spot rates on Treasury bills issued to investors came after further interest rate increases during the Central Bank’s recently finished policy committee meeting. Amid rising inflation and increasing interest rates, investors began to unload naira assets in response to the auction results, which set off selling rallies in the secondary market.
Traders told investors that the market repriced yields higher after the benchmark interest rate hiked by 50 basis points, confirming the influence of shifting market conditions. According to Cordros Capital Limited, as a result, the average yield across all instruments increased by 45 basis points to 25.1%.
According to the investment banking firm, the average yield jumped by 34 basis points to 25.2% in the T-bills segment and by 64 basis points to 25.0% in the OMO segment across all market categories. The DMO made three tenor offers totaling N277.96 billion in the Treasury bill auction.
The amount was split into N16.48 billion for the 91-day bills. At the belly of the curve, the authority offered N6.44 billion in 182-day Treasury instruments to investors and N255.04 billion in 364-day bills-worth of instruments to investors.
Investment banking firms said in their separate reports that aggregate subscriptions settled slightly higher at N373.95 billion compared with N308.66 billion total demand in the previous auction with a bid-to-offer of 1.3x.
The auction closed with the DMO allotting exactly what was offered, Cordros Capital Limited said. The Nigerian Treasury Bill for 91 days was sold at a stop rate of 18.50%, up from 16.33% at the previous auction sales.
At the belly of the curve, the authority offered an 182-day Treasury bill at 19.50% versus 17.44% offered to investors at the previous auction. However, rate-one-year instruments went down to 22.10%, 14 basis points below the 21.24% offered at the previous auction.
“We anticipate that the liquidity surplus in the system next week will likely drive demand for instruments, causing a decline in yields in the secondary market,” Cordros Capital Limited told investors in an email note.
