Treasury Bills Yield Climbs to 23.2% Ahead of Inflation

The average yield on Nigerian Treasury bills inched higher by 83 basis points week on week to close at 23.2% in the secondary market due to sell pressure on naira assets.

The market experienced sell pressure ahead of auction sales ahead of inflation data from September scheduled to be release this week.

After two consecutive months of deceleration, disinflation condition has continue to see threat that could reversed trend.

After benchmark interest rate hike, spot rates on government borrowing instruments has increased, though at a slow pace. 

But market consensus on inflation rate direction has begun to diverge due to increase in pump price of petroleum products.  This has forced investors to continue to rebalance their portfolio make up as part of efforts to optimise returns.

Real return on investors is currently having a narrow gap of 4.9% after interest rate was adjusted to 27.25% to combat 32.15% inflation rate.

Last week, fixed income market traded negative due to weak sentiment. Across the market segments, the average yield advanced by 42bps to 23.1% in the Treasury bills segment, according to Cordros Capital Limited

Fixed interest securities analysts also noted that average yield increased by 192bps to 25.7% in the OMO bills segment.

In its note, Afrinvest Capital Limited stated that Treasury bills market performance was bearish as average yield across benchmark tenors trended higher, up 83 basis points week on week to close at 23.2%.

Across tenors, the long-term instrument recorded the most selloffs as yield rose 133 basis points week on week to 23.6%. Trailing, the medium and short-term instruments inched higher by 96bps and 21bps w/w respectively to 24.2% and 21.9%.

In the new week, the CBN would conduct an OMO auction to rein in part of the inflows, hence analysts said they expect system liquidity to temper. On this backdrop, yield on naira asset is projected to trend higher in the secondary T-bills market. #Treasury Bills Yield Climbs to 23.2% Ahead of Inflation

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