Nigerian Treasury Bills Yield Slides 10bps

The average yield on Nigerian Treasury bills slid by 10 basis points to close at 12.57% amidst sustained buying interest in Naira-denominated instruments despite falling local currency.

Fixed interest securities investors have remained bullish on the treasury curve this week even when inflation has eroded real return on investment.

The negative interest yield on government borrowing instruments remains one of the forces that blocked foreign investors from participating in Nigeria’s fixed income market over the years.

While this has helped reduce Nigeria’s costs of borrowing from the local market, it has also reduced the influx of foreign currency into the country starving for foreign currencies.

A new market dynamic that surfaced has however forced the Central Bank of Nigeria (CBN) to reprice rates on Treasury bills. In its latest auction, short and mid-tenor Treasury bills were priced higher by 100 basis points.

However, the apex bank kept a lid on 364-day which remained unchanged. In the secondary market for Nigerian Treasury Bills, positive interest at the longer end of the yield curve led to a 10bps decline in the average secondary market yield, closing at 12.57%.

In the money market, short-term benchmark interest rates remained at double-digit highs after the CBN removed the limit on the amount that local banks can put in their standing deposit facility.

Data from FMDQ showed that the open repo rate (OPR) and overnight lending rate (OVN), moved higher, reaching 25.67% and 26.67%, respectively on Thursday.

Analysts are expecting further yield repricing in the fixed income market as inflation, and weak local currency exert pressures on portfolio returns.