According to the primary market auction result, Nigerian Treasury Bills Yield held the 91-day and 182-day constant at 2.00% and 3.50% respectively.
The 364-days Bill increased by 100 base point to 9.00% from its previous 8.00% interest. This increase is supposed to have a substantial impact on the Nigerian Stock exchange market.
The 91-day and 182-day bills have remained relatively constant for the 4th consecutive auction. This increase in the 364-days Treasury Bill Yield may be seen to have a negative correlation in the stock exchange market as investors sell off their volatile positions and buy risk-free assets like treasury bills.
Some analysts believe that the increase is in direct response to inflationary concerns as the CBN attempts to curb inflation without detouring growth.
What this means
- An increase in Treasury Bill Yield may cause a drop in the Stock exchange market as analysts expect selloffs to continue towards the end of the week.
- Persistent inflation concerns may lead the CBN to take more aggressive steps and increase the treasury bills rates even higher.
- The banking sector is expected to benefit from the increase as they shift their focus from stock to fixed income.
- Analysts expect that a higher yield trend will boost foreign direct investment, which is aligned with the CBN policy of increasing foreign inflows.
- Some market participators see the increase as a good sign. However, the consensus was held for a steady slow increase rather than an eccentric rate change.