Following a sudden increase in spot rates on 364-day notes to 19% by the monetary authority, the average yield on Nigerian Treasury bills surged to 15.4% in the secondary market.
The rising yield in the fixed income market is a result of shifting market dynamics, which suggests that the Central Bank’s monetary policy committee will probably raise benchmark interest rates at its meeting in February.
Bearish attitudes prevailed in the secondary market for Treasury notes in response to this new reversal in interest rates, as the average yield increased by 626 basis points across all market categories.
The average yield in the secondary market for T-bills increased by 569 basis points to 15.4% across all market categories, according to a market note sent by Cordros Capital Limited to investors. Additionally, the sell pressure increased the OMO yield.
Analysts attribute this negative performance to sell-offs induced by the CBN’s revised NTB auction calendar on Monday to record-high levels, and the significantly higher yields at the end of the Wednesday PMA filtering into the secondary market.
At the primary auction, the CBN revised the auction offer to NGN1.00 trillion – NGN200.00 billion of the 91-day, NGN200.00 billion of the 182-day, and NGN600.00 billion of the 364-day bills – from the NGN417.06 billion previously announced.
The auction was keenly contested as the total subscription settled higher at NGN1.98 trillion with a bid-to-offer of 2.0x. Eventually, the CBN allotted exactly what was offered. The spot rate for 91-day bills rose to 17.24% from 5.00%. In addition, the spot rate for 182-day bills was increased to 18.00% from 7.15%), and 364-day bills was priced at 19.00% from 11.54%.
