With the Central Bank of Nigeria’s (CBN) main market auction (PMA) last week featuring high bids and allotments, Treasury bills bought in the fixed interest securities market experienced an increase.
The average yield on Treasury notes issued in Nigeria decreased by three basis points due to the inflow of capital into naira assets of all tenors, with a focus on the short and belly of the curve.
Yesterday, despite the low levels of liquidity in the financial system, demand for Treasury instruments increased. In the absence of large inflows, benchmark interest rates for the short term increased.
The Nigerian Interbank Offered Rate (NIBOR) increased by 0.75% to 32.00%, as reported by Cowry Asset Note data, reflecting tighter liquidity in the financial sector.
Traders stated that key money market rates such as the Open Repo Rate (OPR) and Overnight Lending Rate (OVN) surged to conclude at 31.41% and 32.08%, respectively.
The buying sentiment continued following lost bids at the auction conducted by the CBN last week, where the apex bank sold less than what the market demanded.
Despite the fact that subscription level came stronger, the apex bank priced 91-day and 182 day treasury bills higher but reduced rate on 364-day bill. Since it has become the most popular asset with the highest subscription, the spot rate reduction on one-year bills has remained constant.
The average yield on Nigerian Treasury bill declined to 20.36% after shedding three basis points. Traders said the average yield contracted in the short (-6 bps), mid (-1 bps), and long (-2 bps) segments, driven by investors’ interest in the 86-day to maturity, whose yield bumped by 30 bps.
Investors also parked fund into 177-day to maturity, causing its associated yield to drop by a basis point in the secondary market. At the end of the curve, 331-day treasury bills lost 2bps of its associated yield due to demand surge
Elsewhere, the average yield expanded by 71 basis points to 21.5% in the OMO bills segment in the secondary market.
