While spot rates on 364-day bills declined during the Central Bank’s weekly auction, the average yield on Nigerian Treasury Bills (NTB) increased much more on the secondary market (CBN).
According to a recent report on the consumer price index from the National Bureau of Statistics, Nigeria’s headline inflation rate deteriorated to 22.04% in March 2023. As a result, the market is witnessing yield repricing. Then, a rise in yield was aided by less liquidity in the financial sector.
Market experts at Cordros Capital claim that the ongoing strain on the banking system is continuing to fuel gloomy views in the secondary market for Treasury notes.
As anticipated, dismal subscription numbers across all maturities were recorded at the primary market auction (1.87x). Notwithstanding the fact that stop rates fell by 4bps on the 364-day bill, to 14.7%, the 91-day and 182-day bills held firm at 6% and 8%, respectively.
The secondary market selloff activity by deposit money institutions increased the average yield throughout the market by 101 basis points to 8.5 percent.
When local banks stayed out of the market due to a lack of liquidity, the average yield in the Treasury bills sector increased by 106 basis points to 8.8% but stayed at 4.01% in the open market operation (OMO) segment.
According to TrustBanc Capital, after the auction, unmet bids with a preference for the 1-year bill found their way into the secondary market. On Friday, the liquidity requirements of DMBs sparked offers at the very end of the auction.
The CBN offered instruments in the auction with three different tenors totaling N149.64 billion: N3.15 billion for the 91-day, N2.52 billion for the 182-day, and N143.97 billion.
Once the overall subscription level ended at N280.35 billion, analysts said that demand at the auction was somewhat greater than it had been at the previous one.
This results in a bid-to-offer ratio that was resolved at 1.9x as opposed to 1.2x in the previous auction. The apex bank ultimately distributed bills totaling N149.64 billion, of which N2.78 billion were for the 91-day, N3.02 billion were for the 182-day, and N143.84 billion were for the 364-day.
The stop rates for these instruments were 6.0% for 91-day bills, 8.00% for 182-day bills, and 14.70% for 364-day bills (previously: 14.74%).
