Treasury Bills Yields Spike at Primary Market Auctions in H1 2017—Report
By Modupe Gbadeyanka
One of the top investment management firms in Nigeria, Cowry Asset Management Limited, has released its 2017 half-year review and outlook for the second half of this year.
In the report, the firm noted that treasury bills sales by the Central Bank of Nigeria (CBN), which were greater in H1 2017 relative to the corresponding period of the preceding year, came at higher cost as the short term debt instruments were auctioned at double the stop rates in the review period (relatively to H1 2016) amid surging inflationary trends occurring alongside a contracting economy.
The firm remarked that average stop rates for the 91-day, 182-day and 364-day bills increased to 13.64 percent (from 6.40 percent in H1 2016), 17.28 percent (from 8.51 percent in H1 2016) and 18.67 percent (from 10.25 percent in H1 2016) respectively.
It added that the 182-day and 364-day bills yielded positive real returns as inflation rate average averaged 17.23 percent.
In a related development, Cowry Asset Management Limited said real returns remained negative in first half of 2017.
The firm pointed out that commercial banks’ depositors took higher deposit rates in H1 2017 compared to H1 2016 in line with general funds market trend.
This was however eroded by rising inflation rates, resulting in significantly negative real returns with 30 days bank deposit rates averaging 8.61 percent in the review period (higher than 6.71 percent in H1 2015); interest rates on 3 month deposits averaged 9.17 percent in the review period (higher than 6.86 percent in the corresponding period of 2016); while interest rates on 12 months deposits averaged 10.76 percent in the review period (compared to 5.24 percent in same period of 2016).