Treasury Bill Yield Rises As Banks Reduce Holdings

LBS Discloses FG's Targets With Naira Redesigning

Due to restricted liquidity, local deposit money institutions cut their holdings of Nigerian Treasury notes, which resulted in a rise in the average yield on these bills in the secondary market. Prior to the refinancing of maturing notes on Wednesday, selloffs across the day were sparked by a lack of capital in the money market.

The average yield across all instruments increased by 83 basis points to 23.4% following a negative excursion, according to a letter sent to clients by Cordros Capital Limited.

The average yield increased by 69 basis points and 91 basis points to 22.8% and 24.4%, respectively, in the Nigerian Treasury Bill and OMO Bills divisions of the fixed income market, according to traders across all market segments.

“We believe the sustained dearth in system liquidity will continue to undermine demand for instruments in the T-bills secondary market, causing yields to expand further,” Cordros Capital told investors.

The Debt Management Office, on behalf of the Central Bank, is scheduled to hold a primary market auction for Nigerian Treasury bills on Wednesday, where it will roll over N166.11 billion worth of maturing bills.

The Treasury bills market closed the week bearish due to tight system liquidity. Consequently, the average mid-rate increased by 96 bps week-on-week to 21.43%.

In the money market, the Nigerian interbank offered rate increased marginally by 0.03% to reach 32.43% as banks with liquidity sought higher rates on Friday.

System liquidity stayed short throughout the week, impacted by FX settlements, CRR debits, and other outflows. Thus, the Open Repo Rate (OPR) and the Overnight Rate (O/N) increased significantly by 789 bps and 753 bps to 32.06% and 32.53%, respectively, week-on-week.

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