Yields on Nigeria’s treasury bills (TBills) ticked upward unexpectedly at the last primary auction, as the Central Bank of Nigeria (CBN) increased its supply, presenting investors opportunity to bid for higher returns before rates are broadly anticipated to decline.
The N650 billion offered at this auction is higher than the N570 billion offered at the previous auction. Samuel Gbadebo, research analyst at CardinalStone, explained that this gave investors leeway to bid at a higher yield.
The true yields across all tenors inched upward to 15.92 percent, 16.81 percent, and 19.25 percent from 15.59 percent, 16.52 percent, and 18.72 percent, respectively, across the 91-day, 182-day, and 365-day tenors.
This upward trajectory is the first since the 50 basis points rate cut in September by the monetary policy committee. The key driver behind this is the anticipated faster slowdown in inflation, which should help anchor interest rate expectations.
The rise in treasury bills yields happens despite the market remaining flush with liquidity and a recent rate cut by the Monetary Policy Committee (MPC).
Read also: Yield on 1-yr treasury bills heads back to normal, drops to 19.4%
“We anticipate a relatively calm outing at tomorrow’s NTB auction, with stop rates expected to stay broadly stable across maturities but with a mild upward bias.
“The market remains flush with liquidity at N1.77 trillion as of October 21, while maturing bills worth N378 billion provide additional reinvestment support, translating to a comfortable liquidity-to-offer coverage of about 2.72,” Matilda Adefalujo, fixed-income analyst at Meristem, said in an earlier report.
Matilda explained that there’s a minimum rate at which CBN will allow yields to fall, as it will still like to attract foreign investors, “and for the time being, we won’t be seeing a consecutive fall in yields, there will be an element of surprise here and there.”
“This means that there are opportunities for investors to get higher yields,” she said.
Consequently, the T-bills secondary market (where existing bills are traded) ended the day slightly down. This is because the average yield (the return investors demand) crept up a tiny bit, from 17.34 percent to 17.35 percent. Even though some investors were buying, a lot of investors were selling the bills due in October 2026, which pushed the market’s performance down overall.
Odinaka Linus-Nwokonkwo, treasury analyst, Access Bank in an interview with CNBC, projected that yields to close higher as market sentiment about NT-bills is quite bearish at the moment.
Read also: Segregated OMO market fuels yield gap with Treasury Bills
Ayodeji Ebo, managing director of Oof ptimus by Afrinvest, advises that investors lock into longer-tenored instruments now to secure current yields before rates fall further.
Reflecting investors’ current appetite, total subscription came at N750.91 billion, which is unusually below the demand level reported at the previous auction. While N391.57 billion was sold, less than the N650 billion that was issued across the three tenors.
Still, investors exhibit a strong appetite for treasury bills with longer duration, as the total subscription for one-year paper settled at N674.25 billion.
The offer ranged from N100 billion in a 91-day bill, N100 billion in a 182-day bill, and N450 billion in a 364-day bill.
The 365-day bill saw the highest subscription of N674 billion; however, only N316 billion was allotted.