Yield on Nigerian Treasury Bills Crashed To 3.4%
Although, there is expectation that the CBN will rollover N56.91 billion worth of maturities to market participants at the primary market auction scheduled for midweek.
This sum for refinancing is estimated to be split into 90-day bills with issuance value worth N1.55 billion, 182-day bills worth N1.46 billion, and 364-day bills worth N53.90 billion.
Based on previous auction result, a number of fixed income analysts are expecting the stop rates of the new issuances to moderate as a result of strong demand expectations.
Last week, N10 billion worth of Nigerian Treasury bills matured via open market operations (OMO bills) without refinancing. This pushed liquidity in the financial system upward, though the level was also impacted by debit on banks cash reserve for failure to meet 65 per cent loan to deposit ratio.
From single digit level, market data showed that the overnight lending spiked by 317 basis points to 14.5per cent as N995.15 billion cash reserve debits put pressure on system liquidity.
Yield has been descending since the final quarter of 2022, dropping from about 11 per cent seen in November. Investors switched to buying mood just after when the apex bank raised monetary policy rate by 100 basis points in November.
A slew of fixed income analysts had predicted that yield would be re-priced upward on account of the new catalysts but it appears the projection was tempered by cash flowing toward the bills market.
In the latter part of the year, the apex bank began to reduce spot rates across tenored bills at its weekly treasury bills auctions – then, a new signal filtered through the secondary market and yields curve plummet.
“The buoyant liquidity in the system continued to trigger bullish sentiments in the Treasury bills secondary market, with local banks having to sterilize idle cash to avoid excess cash reserve ratio debit in the week”, Cordros capital said in a note.
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