Treasury Bill, OMO Yields Diverge ahead of Inflation Data

The average yield on Nigerian Treasury bills and the OMO moved in different directions in the secondary market after the two naira assets saw their returns converge around 25% in the recent past. 

On Tuesday, the average yield on the Treasury bills shrank as demand for naira asset increased in the secondary market. On the other hand, the market witnessed selloffs in the OMO market.

Treasury investors were noted to be taking positions ahead of inflation data and the expectation that the economy will rebound in the second quarter. Nigeria’s consumer price index accelerated to 34.19%, its multi-year high, due to persistent food crisis.

The market has been relative trading sideways after tight supply side at the primary market auctions. The market has seen investors boycotting two OMO bills primary market auction, signaling investors’ apathy for the local borrowing assets.

Traders said the change in mood was caused by subdued pricing rates in the main market recently. The apex bank has on consistent basis reduce spot rates on long dated Treasury and OMO bills at its auction.

With the expectation that inflation rate pressure will ease, investors have started purchasing Treasury bills in the secondary market. The market has seen a 7.44% gap between inflation (34.19%) and the benchmark interest rate (26.75%) since last month. 

Traders reported that yield contracted by 7bps to 25.6%. Across the curve, the average yield declined at the short (-1bp), mid (-2bps), and long (-14bps) segments, according to Cordros Capital Limited.

The investment firm said the yield contraction was as a result of buying interest in the 86-day to maturity which shed -2bps. Investors also queue behind 177-day to maturity bills, whose yield also bumped by -2 bps, while demand for 205-day to maturity bills dragged the yield lower by -149 bps.

Elsewhere, the average yield expanded by 44bps to 26.6% in the OMO bills segment in the secondary market. #Treasury Bill, OMO Yields Diverge ahead of Inflation Data CBN Defends Naira with $39m in Forex MarketThe post Treasury Bill, OMO Yields Diverge ahead of Inflation Data appeared first on MarketForces Africa.