T-Bill Rate Ends Flat As Naira Tumbles At Investors Window


T-bill rate ends flat on Tuesday, 15 June, 2021 as Nigerian headline inflation rate recedes for the second consecutive months after the initial jumpy trend. Nigeria’s local currency, Naira, tumbles at Investors and Exporters window to N411.75 to a dollar spelling further pressure for the productive segment of the economy.

The local currency has been under pressure since the unification of the Central Bank official rate with the Nigeria autonomous foreign exchange rate which analysts said has widened the spread at the parallel market by 22%.

Last week, liquidity at the Investors and Exporters window decline by 18% on average to $126 million. Consequently, the naira exchange rate at the window depreciated against the greenback by 12 basis points week on week to N410.80.

“The premium between the Investors and Exporters Window and parallel rates remained elevated at 22%”, Chapel Hill Denham said in a report on Tuesday

While the fixed income space traded cold, average yield on the Treasury bill was flattish at 6.4%. Though average yield at the open market operations (OMO) segment expanded by 4 basis points to 9.7%.

Yields repricing has been slowed down in the month of June after the monetary policy committee maintained the status quo on benchmark interest rates at the last meeting.

The market has recorded investors’ apathy at short to medium tenor but that appears to have reversed, though not in totality with potential uptick expectation in spot rate at the Central Bank auction this week.

Fixed income participants have been earning returns below average inflation rate surge in the last two years following a 19consecutive monthly jumps.

Headline inflation has however started making a fresh foray southward.

On Tuesday, 15 June, 2021, the National Bureau of Statistics, NBS, earlier today announced that the headline inflation rate declined by 19 basis points to 17.93% in May 2021 from 18.12% in April driven mainly by the fall in food prices.

However, in the money market, overnight lending rate dipped by 7.8 percentage points to 15.2%, following inflows to the system from open market operations (OMO) maturities worth NGN46.00 billion.

Trading in the Treasury bond secondary market was mixed.

Across the benchmark curve, the average yield was flat at the short and long ends but expanded at the mid (+2bps) segment, following a sell-off of the JUL-2030 (+5bps) bond.

In a related development, the US Treasury’s 20-year reopening auction hit a high yield of 2.120% on Tuesday, down from the 2.286% high in May’s auction.

The bid to cover ratio for the auction was 2.40, above the 2.24 ratio in the previous auction. Dealers represented 56.2% of the bids, with direct bidders at 10.87% and indirect bidders at 32.93%.

The decline in the long end of the curve could reduce debt cost pressure on Nigeria’s proposed foreign currency in 2021.  In the foreign exchange market, the naira depreciated at the Investors and exporters window and parallel market by 0.2% to N411.75 and 0.6% to N505.00 respectively.

Source: Market Forces

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