Spot Rate on 364-Day T-Bills Rises to 10%

Spot Rate on 364-Day T-Bills Rises to 10%
Godwin Emefiele

Spot Rate on 364-Day T-Bills Rises to 10%


Spot rates across Nigerian Treasury bills tenored inched up strongly at the Central Bank of Nigeria (CBN) primary market auction on the back of inflation rate pressures.

Market participants have been noted to be demanding higher returns on investment due to apex bank hawkish tone. Analysts told MarketForces Africa that high headline inflation and worsening exchange rate have negatively impacted naira asset.

Unfortunately, inflation is projected to rise further while Nigerian local currency, the naira, has continued to shed value across foreign exchange market.

While the future remains uncertain, the ongoing yield repricing in the fixed income market have sent positive signals that could see stronger investment positioning. Yield has been projected to rise but stock market has started feeling the portfolios rebalancing.

At the auction conducted last week by the apex bank, spot rate on 364-day treasury bills printed higher at 10%, up 150 basis points from its previous pricing position.

To stem inflation rate pressure, the CBN sold Treasury bills worth N214.74 billion to mop up the matured N219.74 billion bills.

“The hike in rates by CBN was in line with our expectations, hence the reason for the higher yield across all maturities tracked”, Cowry Asset Management Limited said in market note.

Market analysts reported that the stop rate for 91-Days, 182-days, 365-Days bills climbed to 5.50% (from 4.00%), 5.85% (from 5.00%), 10.00% (from 8.50%), respectively.

Also, the Nigerian Treasury True yield for 1 month, 3 months, 6 months, and 12 months grew in lockstep with rates, climbing to 6.99% (from 6.46%), 7.66% (from 7.23%), 9.00% (from 8.42%), and 8.99% (from 8.23%), respectively.

Elsewhere, given the strain on the financial system’s liquidity and in spite of the matured open market operation (OMO bills) worth N5.00 billion.

Hence, the Nigerian Interbank Offered Rate (NIBOR) rose for most tenor buckets: according to Cowry Asset Management.

Specifically, 1 month, 3 months, and 6 months jumped to 11.94% (from 10.45%), 13.46% (from 12.35%), and 13.32% (from 11.89%), respectively. Data from FMDQ Exchange shows that the overnight rate, however, fell to 12.34% from 12.40%.

“We anticipate bearish money market action as financial sector liquidity may come under increased strain due to the limited maturing treasury and OMO bills”, analysts said.

Cordros Capital analysts said in a market note that average system liquidity level settled lower last week, but remained positive at a net long position of N78.72 billion versus a net long position of N352.31 billion in the previous week.

#Spot Rate on 364-Day T-Bills Rises to 10%#