As local deposit money banks (DMBs) suffering liquidity challenges unloaded some of their investment securities holdings to strengthen their positions on Tuesday, the average yield on Nigerian Treasury bills increased even further. As the apex bank primary market auction included higher spot rates, several fund managers also decided to adjust holdings. According to market opinion, the tendency of re-pricing spot rates will persist because of shifting market dynamics.
The monetary policy tightening, which saw the benchmark interest rate increase to 18% after more than two years of a dovish attitude in an effort to stimulate real growth in the economy, had an impact on money pricing. Financial system liquidity in the money market began the week with a positive balance of 89.32 billion. Banks sold their interest in order to meet the daily need for liquidity, which caused the yield curve to rise as prices fell.
According to TrustBanc Capital Limited, the system had a shortfall of 124.67 billion as a result of withdrawals made by deposit money banks at the standing lending facility (SLF) window of the central bank (CBN) totaling 215.61 billion. As a result, analysts said that financing rates for repo and overnight lending ticked up to come close to market cap levels, respectively at 18.63% and 19.00%.
“In the absence of any major inflow, we believe system liquidity will maintain its deficit run, while funding rates remain elevated”, TrustBanc said in its market brief.
traded in a gloomy mood as the average yield on Treasury notes in the secondary market increased by 68 basis points to 8.8%. In an email to clients, analysts at Cordros Capital noted that the average yield increased at both the short (+45bps) and long (+46bps) ends of the curve.
This happened after the 44-day to maturity selloffs, which saw a gain of 179 basis points. In what looks to be an early exit, investors liquidated the 352 days to maturity bond as well, increasing the yield by 13.12 percentage points.
In contrast, when market players wanted the 149-day to maturity, the corresponding yield decreased by one basis point, and the average yield at the mid segment decreased by one basis point.
Elsewhere, the average yield was unchanged at 4.0% in the open market operations (OMO) bills segment. Trading activities in the bond market were quiet, as the average yield closed flat at 13.5%. Across the benchmark curve, the average yield was flat at the short and mid segments but expanded slightly at the long (+1bp) end due to profit-taking activities on the APR-2049 (+4bps) bond.
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