Yields on treasury bills rise to 3.3% amidst sell-offs

AVERAGE yields on Nigerian Treasury Bill (NTB) rise to 3.3% on Thursday amidst rounds of sell-offs across the short end of the fixed income market segment.

This is coming amidst cautious drive in the fixed income segment as market participants looking for to the monetary policy decision on benchmark interest rate amidst uncertainties.

Analysts said the Nigerian fixed income market traded with a slight bearish bias today, reflecting the outcome of the NTB auction yesterday.

In the bills market, analysts noted the NTB benchmark curve expanded by an average of 48 basis points (bps) to 3.26%, driven by sell-offs across the curve.

Q2-2021 NTB auction calendar showed that the Debt Management Office (DMO) plans to roll-over 100% of maturing bills.

The DMO intends to issue N570.41 billion in total, split across 91-day (N92.1 billion), 182-day (N79.6 billion), and 364-day (N399.7 billion) tenors.

Chapel Hill Denham said three key factors will probably drive a slight uptick in NTB yield in the short term.

It listed these as DMO’s attempt to mop up all maturing NTB over Q2-2021, the thinner OMO maturity profile in Q2-2021, relative to Q1-21, and expectation that the CBN will be more cautious in expanding its OMO liabilities.

Thus, implying that NTB and bonds will regain status as primary instruments for carry trade, analysts explained.

Amidst these developments and expectation, the open market operations (OMO) benchmark curve rose by 33bps on average to 7.03%.

In the bond segment, yields compressed across the benchmark curve by an average of 5bps to 10.15%, driven by short (-30bps to 8.08%) and long (-3bps to 11.28%) bonds.

Meanwhile the intermediate bonds (+10bps to 10.58%) expanded.

Yesterday, Primary Market Auction recorded bearish outcome as N2.5 billion, N5.9 billion, and N53.5 billion worth of bills were sold across the 91-day, 182-day, and 364-day instruments at 2.0%, 3.5%, and 7.0%.

As a result, only the stop rate on the 364-day tenor increased from 6.5% as investors cautiously played at the short end.

Today, the CBN mopped up NGN10.0 billion, NGN20.0 billion, and NGN70.0 billion at primary market auction across the 96-day, 180-day, and 362-day at 7.00%, 8.50%, and 10.10%.

Analysts at Greenwich Merchant Bank said in a report that stop rates remain unchanged from the previous auction.

At the money market, interbank funding pressure was soft as financial system liquidity opened slightly higher.

Market figure shows system liquidity opened at N268 billion from N193 billion yesterday, partly supported by the DMO’s net NTB repayment of N14.8 billion.

Consequently, interbank funding rates moderated, with the Overnight and Open Buy Bank rates moderating by 75bps and 17bps to 12.75% and 12.50%, respectively.

Funding pressures will likely return on Friday when the CBN is scheduled to hold the bi-weekly retail FX auction, says Chapel Hill Denham.

In the currency market, the foreign exchange rate traded flat across all segments of the FX market, save for the Investors and Exporters Window, which depreciated by 2bps to N409.67.

Precisely, the naira closed at N379.00 in the official segment, N380.69 in Secondary Market Intervention Sale (SMIS) segment, and N485.00 in the parallel market segment.

Yields on Treasury Bills Rise to 3.3% Amidst Sell-offs