The average yield on Nigerian Treasury bills (NTB) spiked further in the secondary market amidst declining spot rates on 364-day bills at the weekly auction conducted by the Central Bank (CBN).
The market is experiencing yield repricing as Nigeria’s headline inflation rate worsened to 22.04% in March 2023, according to the National Bureau of Statistics recent report on the consumer price index. Then, lower liquidity in the financial system helped yield uptick.
According to market analysts at Cordros Capital, the persistent squeeze in the financial system continues to trigger bearish sentiments in the Treasury bills secondary market.
At the primary market auction, subscription levels came in weak across all maturities as expected (1.87x). Although stop rates cleared lower on the 364-day bill by 4bps to 14.7%, the 91-day and 182-day bills held firm at 6% and 8%, respectively.
Due to selloff activities by deposit money banks in the secondary market, the average yield across the market expanded by 101 basis points to 8.5%.
Across the market segments, the average yield in the Treasury bills segment inched higher by 106 basis points to 8.8% but remained at 4.01% in the open market operation (OMO) segment as local banks watched from the sidelines amidst liquidity dearth.
TrustBanc Capital said post auction, unmet bids filtered into the secondary market, with a preference for the 1-year bill- saying liquidity needs of DMBs stirred offers at the near end on Friday.
At the auction, the CBN offered instruments worth N149.64 billion, split into three tenors: N3.15 billion for the 91-day, N2.52 billion for the 182-day, and N143.97 billion for the 364-day.
Analysts said demand at the auction was slightly higher than the previous one, as the total subscription level settled at N280.35 billion.
This translates to a bid-to-offer settled at 1.9x as against 1.2x recorded at the previous auction. Eventually, the apex bank allotted bills worth N149.64 billion – N2.78 billion for the 91-day, N3.02 billion for the 182-day, and N143.84 billion for the 364-day.
These instruments were priced at stop rates of 6.00% for 91-day bills (unchanged), 8.00% for 182-day bills (unchanged), and 14.70% for 364-day bills (previously: 14.74%).
