October 12, 2015

Treasury bill yields decline further amidst high liquidity

By Emeka Anaeto

Increased liquidity in the money market last week has further forced down yields on government securities as Central Bank of Nigeria, CBN, steps up efforts to achieve its targeted sales for the remaining part of this year.

The apex bank has raised N127.07 billion in trading Nigerian Treasury Bills, NTB, whose maturities range between three months and one year at lower yields compared with its previous auction. CBN  last month announced that the it planned to auction N814.78 billion in NTB between September 17 and December 3, 2015.

The apex bank sold N25.40 billion of the 91-day paper at a yield of 10 percent, which is lower than 10.50 percent rate at the previous trading session in September. It sold N33.49 billion worth of six-month NTB at a yield of 12.20 percent, down from 13.39 percent on September 02, 2015 and paid 12.50 percent to sell N68.18 billion of one-year debt less than the 14.69 percent yield at the previous auction. The yield peaked at 14.71 per cent at the August 05 auction.

In all yields has declined four consecutive times in the past two months. Available information on the CBN’s NTB plan indicated that government would auction N215.12billion worth of the three-month instrument, N238.5billion in the six-month instrument and N419.34billion worth in the one-year instrument.

Previous week, Federal Government bond prices appreciated and corresponding yields fell on continued bargain hunting activities at the over the counter market but risk adjusted returns remained attractive.

The 10-year, 16.39 per cent FGN January 2022 bond gained N2.0 (yield decreased to 15.51 per cent); the 7-year, 16.00 per cent FGN June 2019 bond climbed by N1.66 (yield decreased to 14.69 per cent); the 5-year 15.10 per cent FGN April 2017 bond gained N0.90 (yield declined to 14.66 per cent); while the 3-year, 13.05 per cent FGN August 2016 bond instrument upped by N0.34 (yield fell to 14.04 per cent).

However, the 20-year, 10.00 per cent FGN July 2030 bond remained steady at 15.51 per cent. At the international bond market, FGN Eurobonds depreciated on sell-offs amid decline in external reserves- week-on-week, the reserves declined by 0.5 per cent to N30.54 billion (from N30.69 billion). Week-on-week, the 10-year, 6.75 per cent FGN January 2021 paper fell by USD1.77 (yield rose to 7.11 per cent) while the 5-year, 5.13 per cent FGN July 2018 bond declined by USD0.81 (yield increased to 5.47 per cent).

Also, the 10-year, 6.38 per cent FGN July 2023 bond lost USD2.32 (yield jumped to 7.54 per cent).