Nigerian Treasury note yields fell precipitously across all tenors as a result of a little amount of secondary market demand. Despite the banking system’s limited liquidity, there was a growing hunger for naira assets, which contributed to the market demand rise.
Even if interest rates have been rising steadily since May 2023, fixed interest investors’ assets are now more vulnerable to unfavorable price fluctuations. According to figures issued by the statistics office on Monday, Nigeria’s inflation rate had a significant increase of 1.50% in the current reading, culminating in a settlement of 33.20% in March.
This has widened real return on fixed income securities instruments despite high interest rate environment. Money market rates movement suggested liquidity decreased. The overnight lending rate expanded by 31 basis points to 30.4% despite the inflow from FGN bond coupon payment worth N28.53 billion.
Following strong demand for bills, the average yield contracted by 8 basis points to 18.8%, according to Cordros Capital Limited. The firm stated that across the curve, the average yield declined at the short (-23bps), mid (-3bps) and long (-4bps) segments.
Traders attributed the yield contraction to participants demand for 87-day to maturity, causing 127bps decline in its associate yield.
The market also recorded demand for 164-day to maturity bills, dragging its yield lower by 3bps and buying interest in 346-day to maturity caused its yield to decline by 4bps. Similarly, the average yield declined by 3bps to 18.2% in the OMO segment.
In the money market, NIBOR rates advanced across all tenor gauges, indicating a shortage of liquidity in the system. The short term benchmark money market rates declined in the absence of strong inflows into the segment.
The open repo rate (OPR) closed at 29.50% while the overnight lending rate (OVN) settled at 30.38%, respectively. However, the secondary market for Nigerian Treasury Bills experienced positive trading activity, leading to a decline in the average yield ahead of apex bank auction.
