T-Bills yield prints at 3.45% as spot rates fall

Trading activities at the Nigerian Treasury Bills (NTB) secondary market ended on a bullish note last week, as traction was seen at the longer end of the curve, according to traders’ notes.

As a result, the average yield dropped by 14 basis points to close at 3.45% following spot rates price down at the previous Central Bank of Nigeria (CBN) primary market auctions (PMAs).

CBN Auctions results tracked show that there has been price down on spot rates at the previous auctions conducted by the apex bank due to hefty subscription levels driven by healthy liquidity.

Fixed-income traders said the Treasury bills market maintained a bullish run for the fourth consecutive week due to significant improvement in system liquidity. Free funds seeking investment opportunities rested at the treasury market, raising demand while yields swings downward in reaction.

Traders’ notes show that the average yield across short-term and medium-term maturities closed flat at 3.11 per cent and 3.42 per cent, respectively. NTB 26-Jan-23 (+16 bps) maturity bill witnessed selling pressure, while the yields on 9-day to maturity bills remained unchanged.

During the week, the net average position significantly increased to N326.39 billion from N69.72 billion last week and local banks’ objective to re-invest idle cash, according to Cordros Capital Limited.

Consequently, the average yield across all instruments declined by 3.4 per cent. In the coming week, Cordros Capital traders expect the outcome of the NTB auction to shape the direction of yields in the T-bills market.

In the money market, short term rates adjusted upward due to a strained liquidity position, according to traders’ reports. The overnight lending rate increased by 11.08 per cent to close at 13.83 per cent as against the last close of 2.75 per cent.

Also, the Open Repo rate increased by 11.33 per cent to close at 13.33 per cent compared to 2.00 per cent on the previous day. FSDH Capital said money market rates increased by an average of 1121 basis points following the FX retail auction by the CBN.

In the OMO bills market, the average yield across the curve closed flat at 3.92 per cent. The average yield across the long-term maturities remained unchanged at 3.92 per cent.

The CBN held an OMO auction on March 3, selling bills worth ₦30.00 billion across the 89-day (₦5.00 billion), 173-day (₦5.00 billion), and 348-day (₦20.00 billion) tenors with the stop rates remaining unchanged at 7.00 per cent, 8.50 per cent, and 10.10 per cent, respectively.