Yields Rise across Fixed Income Market as Naira Tumbles
The average yields on fixed income instruments increased sharply as investors’ moods switched amidst macroeconomic uncertainties. The selloffs were seen in short-dated bills as the market seeks to reposition portfolios to take advantage of a higher return on long-dated instruments
In the investors’ and exporters’ foreign exchange (FX) window, the Nigerian local currency plunged on the back of higher demand than what the market supplied. The naira depreciated by 0.1% to N437.25 at the official window for investors and exporters
A weak liquidity scenario in the financial system plays out on short-term rates as the average interbank rate spike following significant funding pressures. Data from the money market indicates that the overnight lending rate expanded by 75 basis points to 16.8% as the open buyback rate inched upward.
In the secondary market for trading the Nigerian Treasury bills market, sell pressures were seen on pockets of trading activities recorded in the space, pushing the average yield higher. Traders note indicated that as the average yield expanded by basis points to 7.2%. READ: Treasury Bill Yield Rises as Naira Tumbles
Across the curve, Cordros Capital said in its market note that the average yield expanded at the short (+33bps) end as participants sold off the 23-day to maturity(+133bps) bill, but pared at mid (-1bp) and long (-1bp) segments due to demand for the 163-day to maturity (-1bp) and 345-day to maturity (-1bp) bills, respectively.
Elsewhere in the fixed interest securities trading space, the average yield contracted by a basis point to 10.3% in the open market operations (OMO bills) segment, according to Cordros Capital analysts.
The market expects higher rates on OMO Bills on the back of an interest rate hike that has redefined money pricing in the financial market. Trading activities in the bond secondary market were noted to end with bearish sentiments, as the average yield expanded by 14 basis points to 13.4%.
“Across the benchmark curve, the average yield expanded at the short (+30bps), and long (+6bps) ends due to selloffs of the MAR-2024 (+148bps), and MAR-2036 (+43bps) bonds, respectively; but closed flat at the mid-segment”, Cordros Capital stated. # Yields Rise across Fixed Income Market as Naira Tumbles
