Key Points
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Treasury bills yield falls to 17.72 percent.
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Strong demand drives treasury bills yield lower.
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Liquidity supports treasury bills yield stability.
The average yield on Nigeria’s treasury bills fell to 17.72 percent, which lowered the cost of short-term government borrowing even more. This was due to continued investor interest and plenty of liquidity in the system.
The drop came after the most recent primary market auction, where strong subscription levels across maturities showed that local banks, asset managers, and institutional investors were getting ready to change their portfolios as monetary expectations changed. Analysts said that the drop in yields shows that investors are becoming more comfortable locking in returns, betting that rates may be close to their highest point.
Market participants said that too much money in the banking system was a major factor, along with cautious hope that aggressive monetary tightening might slow down in the next few months.
Treasury bills yield goes up because of high demand
The Debt Management Office held an auction recently where they offered 91-day, 182-day, and 364-day bills. The bids were much higher than the amounts offered. Stop rates went down across the board, and the one-year bill was much lower than it had been in past auctions.
Traders said that pension funds and banks were the main buyers, looking for safe assets with steady returns in a time of volatility in the stock and foreign exchange markets. The drop in the yield on treasury bills also shows that people are becoming more sure that inflationary pressures, while still high, may slowly ease.
Fixed income dealers said that real yields are still attractive, even though they have gone down, especially for domestic investors who have to stay within certain risk limits.
Treasury bill yields are supported by liquidity conditions.
The financial system’s liquidity has stayed strong, thanks to recent government spending and maturing securities that put cash back into the market. Overnight interbank rates stayed pretty low all week, which kept demand for short-term instruments high.
Analysts say that treasury bills are a good investment right now because investors want to keep their money safe while still getting good returns. The drop in treasury bill yields is also a sign of less supply pressure, since fewer aggressive borrowings are expected in the near future.
Some dealers warned that yields might not drop sharply, but instead stay stable because of ongoing inflation risks and uncertainty about exchange rates.
Policy signals shape the outlook for treasury bill yields
People are now paying more attention to what the Central Bank of Nigeria says, especially about managing liquidity and the direction of future policy. Traders said that even though no formal easing is expected, the fact that there won’t be any more tightening could keep treasury bills’ yields close to where they are now.
Economists think that yields will still be affected by inflation data, foreign portfolio flows, and the government’s need to borrow money. If prices or currency markets come under more pressure, the recent trend could change.
For now, the treasury bills market looks strong because there is a lot of demand, there is a lot of extra money, and people are cautiously hopeful about the stability of the economy as a whole.
