Nigeria’s Bonds, T-Bills Mixed after Spot Rates Crash

Nigeria’s Bonds, T-Bills Mixed after Spot Rates Crash

Nigeria’s bond market sustained its rally amidst worsening inflation rate but there was a quiet trading session at the Treasury bills space on Thursday after spot rates across the tenors crashed at the midweek auction conducted to roll over matured bills.

At the midweek primary market auction conducted by the Central bank of Nigeria (CBN), higher demand for short-term debt instruments attracted a larger than expected level of subscription amidst the ongoing rally.

Analysts said due to the large demand seen in the space, resulting in a bid-to-cover ratio of 32.84x, the stop rates for the 91-day, 182-day, and 364-day bills fell.  The trading results from the auction showed that 91-day bills fell to 5.50% from 6.5%, the 182-day bill dropped to 7.3% from 8.0% and 364-day bills declined to 9.89% from 13.05%.

Following quiet trading in the Nigerian Treasury Bills secondary market, the average yield remained at 8.2%. However, the average yield pared by a basis points to 10.1% in the OMO segment, according to Cordros Capital traders.

In the bond market, the prices of FGN bonds remained relatively flat for the bulk of maturities examined, despite the average secondary market contracting by 14 basis points to 13.68%, Cowry Asset Management told clients via email.

Traders said the yields on the 20-year and 30-year debt instruments decreased further, respectively, to 14.44% (from 15.16%) and 14.22% (from 14.45%) amid sustained demand pressure.

Conversely, the yields on the 10-year and 15-year bonds were relatively unchanged from the previous day at 13.94% and 14.00%, respectively. >>> Funding Pressure Sustained as Spot Rate on T-Bills Jumps to 9%

Explaining the pattern across the benchmark curve, Cordros Capital said the average yield contracted at the short (-23bps) and long (-14bps) ends. This happened following buying interests on the FEB-2028 (-118bps) and APR-2037 (-72bps) bonds, respectively, but closed flat at the mid-segment.

Elsewhere, the value of the FGN Eurobond decreased for all of the maturities tracked, according to traders as bearish sentiment returned to the market. Consequently, the average yield expanded by 13 basis points to 11.53%.

In the money market, rates tracked lower as the liquidity level in the financial system improved. Short-term benchmark rates: the open repo rate (OPR) and the overnight lending rate (OVN), narrowed to 11.63% (down from 16.50%) and 11.75% (down from 16.83%), respectively. # Nigeria’s Bonds, T-Bills Mixed after Spot Rates Crash