Investors reduce Treasury Bills holdings amidst rates hike

In a notable shift, the average yield on Nigerian Treasury bills (NTB) edged higher in the secondary market, driven by bearish sentiment across the naira curve.

Market participants reacted decisively to recent adjustments in spot rates during a midweek auction, where both short-dated and longer-dated instruments were repriced higher.
The most pronounced selling pressure was observed in the mid-range of the curve, resulting in a 5-basis-point increase in yields, while the long-end saw a significant 22-basis-point expansion, as highlighted by fixed-income traders at Cowry Asset Limited.

Consequently, the average treasury bill yield surged by 11 basis points week-on-week, reaching a noteworthy 17.46% at the close of the trading session on Friday.

In the primary auction conducted by the Central Bank of Nigeria (CBN), a substantial ₦1.05 trillion was offered across standard maturities in anticipation of robust demand from investors.

As expected, investors’ appetite in the fixed income market remained exceptionally strong, with total subscriptions soaring to ₦2.3 trillion, while final allotments were set at ₦1.0 trillion.

Compared with the previous auction, stop rates for the 91-day and 364-day instruments rose significantly to 15.95% and 19.73%, respectively, up from 15.80% and 15.90%.

Notably, the 182-day tenor maintained a steady rate at 16.65%. At the Open Market Operations (OMO) auction, ₦600 billion was made available across the 7-day, 98-day, and 105-day tenors.

Total subscriptions reached an impressive ₦711.9 billion; however, the Central Bank opted to allot a more conservative ₦236 billion. The stop rates cleared at competitive levels, with 19.35% for the 98-day instrument and 19.40% for the 105-day tenor.

This rise in yields signals an evolving market landscape and underscores strong demand dynamics, making Nigerian Treasury bills an increasingly attractive investment opportunity in the current economic climate.