Bond Market Records Descent Subscription as Yields Drop Slightly

Bond Market Records Descent Subscription as Yields Drop Slightly

Bond market trades quietly as yields dropped marginally by an average of 4 basis points (bps) across benchmark tenors to 4.19%.

This swing was attributed to positive sentiment across the curve, including short (-5bps to 1.74%), mid (-4bps to 4.27%) and long (-2bps to 6.03%) end of the curve.

Generally, the financial system liquidity remained buoyant Wednesday, opening higher at N597.0 billion from N507.7 billion on Tuesday.

As a result, funding pressures were broadly benign as interbank funding rates remained stuck at low single-digit.

Notably, the Overnight (OVN) and Open Buy Bank (OBB) rate rose mildly by 13bps and 50bps to 0.88% and 1.50% respectively.

Analysts at Chapel Hill Denham said they expect funding pressures to remain subdued on Thursday.

But analysts indicated that funding pressure will likely spike on Friday as a result of settlement of the Debt Management Office (DMO) monthly bond auction, as well as scheduled bi-weekly retail FX auction.

Meanwhile, despite ongoing primary market activity, Chapel Hill Denham hinted that sentiments remained mildly bullish in the bond market.

It was noted that short term rates traded broadly flattish.

At the front end of the curve, the Nigerian Treasury Bill (NTB) and benchmark curves closed flat at an average of 0.10% and 0.12% respectively.

In the bond market, yields dropped marginally by an average of 4bps across benchmark tenors to 4.19%, due to positive sentiment across the curve.

These include short (-5bps to 1.74%), mid (-4bps to 4.27%) and long (-2bps to 6.03%) end of the curve.

At the monthly bond auction, the DMO offered N80 billion, split equally between the MAR 2035 and JUL 2045 reopening.

Subscription level was decent at N184.74 billion, implying a bid-cover ratio of 2.3x, but much lower than 4.7x in October.

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However, Nigeria’s debt office allotted the same amount offered.

The MAR 2035 reopening cleared higher by a marginal 3bps to 5.00%, while the marginal rate on JUL 2045 declined by 22bps to 4.785%.

Bond Market Records Descent Subscription as Yields Drop Slightly