T-Bills Rally as Spot Rates Slump
Godwin Emefiele. CBN Governor.
Treasury Bills Market Witnesses Rally Following Decline in Spot Rates.
The Nigerian Treasury bill (NTB) market experienced a surge as spot rates slumped, resulting in a decline in average yields. At the mid-week auction sales conducted by the Central Bank (CBN), downward pricing of spot rates influenced the reduction in average yields.
Bullish activities were observed in the secondary market for treasury instruments, leading to a decrease in the yield curve due to increased prices in the over-the-counter segment. Banks responded by entering buying mode to release available funds against the CBN debits.
According to traders, the average yield on treasury bills increased by 4 basis points on Thursday, settling at 6.8%. Daily Global News reported that the demand level during the CBN auction was influenced by liquidity levels.
The relatively strong subscription at the auction provided the monetary authority with the opportunity to lower spot rates across various tenors. Some fixed income analysts referred to this pattern as financial repression since the real return remains negative in the face of high inflation conditions.
Spot rates for the 91-day Treasury bills decreased to 2.29% from 4.55% at the CBN auction held on Wednesday. A similar decline was observed in the 182-day bills, plunging to 4.99% from 6.44%. At the longer end of the curve, the spot rate for 364-day bills moderated to 7.99% from 8.99%.
In their market brief, analysts at Cordros Capital Limited stated that the average yield remained relatively stable at the short and mid segments, but contracted at the long end. This was a result of increased buying interest in the 287-day bill with a maturity period of -35bps.
Cowry Asset Management mentioned in a market brief that the Nigerian Interbank offered rate decreased for all maturities tracked in the money market.
Market analysts noted that several cash-rich local deposit money banks demanded lower rates due to liquidity levels, causing a slowdown in short-term benchmark rates.
The open repo rate (OPR) experienced a decline of 8 basis points, settling at 11.25%, while the overnight lending rate (OVN) remained unchanged at 11.50%. These figures were confirmed through the FMDQ Exchange platform.
