Yields Rise, Naira Gains as CBN Raises Interest Rate
In the secondary market, the average yields on Nigeria’s naira-denominated fixed income market instruments – Treasury bills, FGN Bonds and OMO Bills reacted to a 100 basis points increase in benchmark interest rate.
Meanwhile, the Nigerian naira held strong against the United States dollar at the Investors and exporters’ foreign exchange window on Tuesday, The naira gained 1.17% against the U.S. Dollar to close at N424.17.
With the fresh hawkish mood of the monetary policy committee, the short-term interest inched upward as the Central Bank of Nigeria officially pushed its policy rate to 14% at the just concluded meeting.
CBN indicates that its previous interest rate hike in May has not filtered through the economy as Nigeria’s headline inflation rate worsened to 18.60 in June, from 17.71% in the previous month.
As the market reacted to the development, the average interbank rate climbed by 44 basis points to close at 14.44%, according to market reports reviewed by MarketForces Africa. This follows as both open buyback and overnight lending rates saw an upward repricing.
Data from FMDQ Exchange showed the Open Buy Back rate expanded by 38 basis points to 14.38% having stayed steady at 14% since last week. Meanwhile, the overnight rate accelerated faster, up by 50 basis points to close at 14.50% after a rather too furious interest rate hike on Tuesday.
In the secondary market for trading Nigerian Treasury bills, transactions market was calm and cold as market assimilates new interest rate movement. However, some pockets of trades were seen at the longer end of the curve in today’s trading session, according to Alpha Morgan Capital note.
Overall, the average rate climbed by 12 basis points to close at 6.83%. Recall that the CBN adjusted the spot rate on long-dated Nigerian Treasury bills last week to 7%. READ: Yield on Treasury Asset Steadies After CBN Auction
At the FGN bond secondary segment, there was somewhat mixed outing. The market witnessed as moderate trading activities along the mid-tenor maturities. As a result, the average yield expanded by 5 basis points position to close at 11.53%.
Traders at Alpha Morgan Capital said in their market noted that participants in the FGN Eurobond space traded on mixed sentiments as skepticism about the direction of the economy, guided activities today. In sum, analysts said the average yield was down by 2 basis points to close at 14.06%. #Yields Rise, Naira Gains as CBN Raises Interest Rate
