Fixed Income Market Sees Yields Decline as Liquidity Pressures Ease
Average yields across fixed income instruments contrast as financial system liquidity improves. Thus, in the money market space, pressure on interbank rates eased following robust system liquidity.
Today, the overnight lending rate contracted by 200 basis points to 5.8%, in the absence of significant funding pressures in the system. However, the Nigerian Treasury Bill secondary market closed with mixed sentiments, as the average yield pared by a basis point to 5.9%.
Cordros Capital said in a market report that across the benchmark curve, average yield contracted at the long (-2bps) end following demand for the 346 day to maturity (-20bps) bill, but stayed flat at the short and mid segments.
Similarly, the average yield at the open market operations (OMO) segment contracted by 60bps to 8.1%. Analysts said trading in the Treasury bond secondary market was bullish as the average yield contracted by 2bps to 12.0%.
Across the benchmark curve, average yield contracted at the short (-4bps) and long (-1bp) ends as investors bought the JAN-2026 (-11bps) and MAR-2050 (-13bps) bonds, respectively.
Meanwhile, the average yield was flat at the mid-segment.
Last week, the average yield on the Nigerian Treasury bill fell 100 basis points as the secondary market maintained a bullish run on the back of improved system liquidity in what Afrinvest analysts called unsuccessful primary market auction bids filtered in.
As a result, the average yield across the curve dipped 100 basis points to close at 5.90% from 6.90% the previous week with the 14-Oct-21, 30-Sep-21, and 16-Sep-21 instruments recording the most buying interest, contracting 219bps, 210bps, and 202bps.
At the Primary Market Auction last week, the Central Bank offered ₦22.9 billion across all maturities and was met with mixed demand with subscription ratios of 0.6x, 0.2x, and 2.7x for the 91-, 182- and 364-Day instruments respectively.
In addition, rates were sustained at the short- and medium-tenured bills while the 364-Day bill declined again by 47 basis points to stop at 8.20%.
“Going into the week, we expect active trading sessions in the T-Bills secondary market on the back of improved system liquidity which stood at ₦230.9 billion in the positive as of Friday”, Afrinvest said.
Similarly, the market witnessed a mixed performance in the FGN Bond secondary market last week, as investors adjust their portfolios with relatively attractive yields across the curve.
Consequently, the average yield on all instruments contracted slightly by 2 basis points to close at 12.07% from 12.09% the previous week.
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Specifically, Afrinvest said the short- and long-tenured instruments witnessed the most demand, as average yield dipped 15 and 4 basis points respectively last week.
“Going into the week, we expect a sustained bullish trend in the secondary market particularly in the short- to mid-end of the curve. Therefore, we maintain our advice that investors position in attractive yields along the curve, particularly at the mid-dated instruments which gained the previous week”, Afrinvest said.
Fixed Income Market Sees Yields Decline as Liquidity Pressures Ease
