The average yield on Nigerian Treasury bills increased by 2 basis points to 18.81% in the secondary market on Monday as investors trimmed holdings at the short end of the curve, CardinalStone Securities Limited has reported.
At the trading session, the stockbroking and investment consulting firm noted that there was buying interest in the belly and long end of the curve but the NTB yield was weighed down by pressure at the short end, which recorded a remarkable rebound in associated yield.
Data from the company on the performance of the market indicated that at the short end, yield surged +13bps but the was subsequently thawed by contractions at the mid (-1bp) and long (-3bps) segments of the curve, thereby closing the average yields 2bps higher at 18.81%.
Based on the latest data, the market responded to lower spot rates on one-year Treasury bills amid the sustained moderation in the nation’s headline inflation as well as growing real returns on naira assets in the debt capital market.
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It would be recalled that last week, the Central Bank of Nigeria (CBN) auctioned N750 billion across the 91-day, 182-day and 364-day maturities, attracting total subscriptions of N3.4 trillion.
At the end of the auction, the apex bank allotted N865.7 billion to bidders, reflecting strong investor demand, with the stop rates for the 91-day and 182-day bills remaining unchanged at 16.30% and 16.50% respectively, while the 364-day stop rate dipped by 31bps to 16.84%.
Investment experts linked the market trend to continued investor preference for long-term attractive yields at the longer end of the NTBs curve.
Also, the Open Market Operations (OMO) offer by the apex bank of N1.0 trillion across the 91-day, 147-day and 154-day maturities attracted significant investor interest, as the total subscriptions surged to N5.5 trillion, representing a 5.5x bid-to-offer ratio.
As a result, the CBN allotted N2.9 trillion, which was above the amount initially offered, underscoring strong investor demand for short-term sterilisation instruments just as sStop rates settled at 19.59% for the 91- day bill, while the 147-day and 154-day instruments both cleared at 18.99%.
Current data on the market indicated that about N3.07 trillion in OMO maturities were scheduled to settle next week, alongside N71 billion in NTB maturities, resulting in an estimated N3.14 trillion liquidity injection into the financial system.
Analysts project that the market’s liquidity conditions are likely to tighten modestly as the apex bank is going on with its planned N700 billion NTB auction, with settlement expected to absorb liquidity from the system.
They believe that this could be partly offset by over N700 billion in expected OMO maturities, which should provide some liquidity support to the market in the immediate term.
