The average yield on Nigerian Treasury notes was 6.5% at the start of the week, as reasonably solid liquidity supported demand in the secondary market. Following the influx of N51.12 billion in coupon payments from FGN bonds, liquidity levels in the banking sector increased, pulling short-term benchmark rates lower.
While market activity was low, the average yield finished steady at 6.5% after spot rates were priced down at the Central Bank’s primary market auction last week. The Central Bank of Nigeria successfully sold N36.56 billion in securities with maturities ranging from 91 days to 182 days to 364 days in the primary market auction last week.
According to analysts’ notes, the quantity sold matched the amount offered. Notably, spot prices have decreased significantly compared to the previous auction.
Auction results showed that the spot rate on 91-day dropped to 3.67% from 4.99%. Also, the CBN priced 182-day bills down to 5.11% from 6.50%. Meanwhile, the spot rate on the 364-day saw a substantial decrease to 9.25% from 11.37% previously.
This drop in yields suggests increased demand for the securities, analysts said, noting that the total subscriptions amounted to N321 billion, indicating a bid-to-cover ratio of 8.79x across all three maturities. #Naira Devaluation Deepens Economic Crisis in Nigeria
Demand was particularly strong for the 364-day maturity, reflecting investor confidence in longer-term securities. This outcome indicates robust interest in Nigerian Treasury Bills, possibly due to the attractive yields offered in this auction.
Cowry Asset Management Limited anticipates yields to stay relatively downbeat in the coming week as market participants digest the current economic data and development within the foreign exchange market in line with the level of liquidity conditions in the financial system.
Across the curve, Cordros Capital Limited said the average yield was unchanged at the short and mid segments but declined at the long (-1bp) as investors demanded the 346-day to maturity (-1bp) bill. Conversely, the average yield contracted by 1bp to 12.1% in the OMO segment.
Traders envisage lower demand for T-bills in the secondary market following expectations of a squeezed system liquidity. Thus, analysts believe yields in the secondary market will head northward.
