The average yield on Nigerian Treasury bill has fallen below 22% in the secondary market as investors gear up for the upcoming N700 billion auction. Trading activity in the Treasury bills market remains subdued, with mild bullish sentiment as participants assess the latest inflation data.
Treasury bill yields decreased marginally as a result of the increasing demand for naira-based investments, especially for longer-term securities. Financial analysts claim that the recent release of rebased consumer price index (CPI) data for January 2025 played a role in this dip by demonstrating a significant drop in inflation. In December 2024, the headline inflation rate was 34.80%; in January 2025, it was 24.48%.
As a result, interest rates on government securities declined across various tenors, with long-term securities experiencing the most significant drop. The average benchmark yield decreased by 9 basis points (bps) to close at 21.93% ahead of the midweek primary market auction.
Breaking it down further:
- Short-term bills (less than 3 months) saw a slight yield decline of 1 bp.
- Mid-term bills (around 6 months) also experienced a 1 bp drop.
- Long-term bills (almost a year) recorded a significant drop of 12 bps.
Analysts at Cordros Capital Limited attributed this decline to strong investor demand for specific Treasury bills, including those maturing in 79 days (-1 bp), 170 days (-1 bp), and 289 days (-90 bps). Additionally, increased buying activity was noted in the Open Market Operations (OMO) Bills segment, where a recent N10 billion OMO repayment led to a 49 bps reduction in yields, bringing them down to 25.9% in the secondary market.
On behalf of the Central Bank of Nigeria, the Debt Management Office (DMO) plans to issue Treasury Bills totalling N700 billion over three tenors: 91 days, 182 days, and 364 days. Analysts anticipate that while investors get ready to place their bids in the next auction, secondary market trade will continue to be quiet.
