Treasury Bills Yields Drop after Eurobond Issuance

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Nigerian short-term treasury bill yields fell 50 basis points yesterday on expectations that the government will sell less debt at auction in the second quarter after raising $2.5 billion from a Eurobond.

The government has been working to lower its borrowing costs, particularly as inflation fell for the 12th time in a row in January. It sold Eurobonds last Thursday to pay off the bills rather than rolling over debt as it has done in the past.

The federal government has been switching into dollar debt to lower costs. It intends to book more loans offshore before 2019 to increase its foreign loans to 40 percent of total debt from 27 per cent now.

The West African nation plans to source $2.8 billion abroad to help finance its 2018 budget, which is still under consideration with lawmakers.

Finance Minister, Kemi Adeosun said this month that the country will redeem 762.5 billion naira ($2.5 billion) worth of treasury bills to reduce the government’s costs.

Traders told Reuters that the short-dated bill with 60 days to maturity, traded at 14.3 percent on Tuesday, down from 14.8 percent in the previous session.

Investors are waiting for the debt office to announce which bills it intends to pay off and a reduction in auction volumes for second quarter, which could spur buying, traders said.

The central bank, however, has been mopping up liquidity through open market bills to keep rates above inflation.

The medium-term bills with 150-days to maturity, traded at 14.7 percent on Tuesday, down from 14.9 percent previously. The longer-dated notes were unchanged at 13.45 percent, traders said.

Nigeria has a treasury bill portfolio of N2.7 trillion. It paid off N198 billion worth of bills in December, leading to rates dropping by around 300 basis points.