Yield Dips After Spot Rates on 182-Day, 364-Day T-Bills Fall
The average yield on Nigerian Treasury bills dips 3 basis points in the secondary market on Thursday after the Central Bank auction result shows 182-day and 364-day bills spot rates dropped.
As predicted by some fixed income market analysts, the CBN primary market auction registered robust demand with subscription outpacing total allotment – thus investors return to the secondary market to fill the gap.
High demand for the Treasury instruments thus dragged yield amidst robust financial system liquidity. In the money market, short term rates adjusted downward after a flattish close on Wednesday, indicating that liquidity pressures eased.
The average interbank rate dropped by 200 basis points, according to Alpha Morgan Capital market note, due to a slowdown in open buy back and overnight lending rates.
Data from the FMDQ Exchange shows that the Overnight rate decreased by 2.00 per cent to close at 14.25 per cent as against the last close of 16.25 per cent, and the open buy back rate also decreased by 2.00 per cent to close at 13.75 per cent compared to 15.75 per cent on the previous day.
In the Treasury bills secondary market, trading activities closed on a mildly positive note with average yield across the curve decreasing by 3 basis points to close at 4.49 per cent from 4.52 per cent on the previous day.
According to FSDH Capital, the average yield across the long-term maturities declined by 5 basis points. However, analysts see average yields across short-term and medium-term maturities remained unchanged at 3.52 per cent and 3.74 per cent, respectively.
NTB 27-Oct-22 (-44 bps) and NTB 29-Sep-22 (-15 bps) maturity bills witnessed buying interest, while yields on 20 days to maturity bills remained unchanged, according to FSDH Capital note.
On Wednesday, the CBN held its scheduled Primary Market Auction on December 8, selling NT-Bills worth ₦53.73 billion across the 91-day (₦1.55 billion), 182-day (₦0.79 billion), and 364-day (₦51.39 billion) tenors.
The stop rate for the 91-day tenor remained unchanged at 2.50 per cent. However, the stop rates for the 182-day and 364-day tenor cleared lower at 3.45 (-5 bps) and 5.34 per cent (-55 bps), respectively.
The auction was oversubscribed by 355 per cent, with bid-to-cover ratios settling at 0.39x (91-day), 0.18x (182-day), and 6.22x (364-day).
In the open market operations (OMO) bills market, the average yield across the curve decreased by 3 basis points to close at 5.48 per cent as against the last close of 5.51 per cent.
Average yield across the long-term maturities declined by 53 basis points. However, the average yields across short-term and medium-term maturities expanded by 4 basis points and 21 basis points, respectively.
FSDH Capital said yields on 3 days to maturity bills compressed with the 4-Oct-22 maturity bill recording the highest yield decrease of 64 basis points, while yields on 6 days to maturity bills remained unchanged.
In the bond segment, trading activities on FGN bonds in the secondary market closed on a calm note as the average yield on the instrument across the curve closed flattish at 8.05 per cent, according to FSDH Capital.
Meanwhile, analysts noted that average yields across medium tenor and long tenor of the curve remained unchanged. However, the average yield across the short tenor of the curve increased by 1 basis point.
The 27-MAR-2050 maturity bond was the best performer with a decrease in the yield of 13 basis points, while the 26-APR-2049 maturity bond was the worst performer with an increase in yield of 11 basis points.
Maintaining its previous stance, FSDH Capital projected that the secondary bond market is likely to remain subdued in the short term. #Yield Dips After Spot Rates on 182-Day, 364-Day T-Bills Fall
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