Bond Rate Slides as Fixed Income Market Stays Quiet
Patience Oniha, Director-General, Debt Management Office

Bond Rate Slides as Fixed Income Market Stays Quiet

Bond rate slides as the fixed income market sustains a quiet trading session Thursday amidst a persistent liquidity squeeze in the financial system. Interbank rates faced pressure as the Open Buy Back (OBB) and overnight rates (O/N) rates spiked by 225 and 250 basis points to 18.25% and 18.75%, respectively.

Chapel Hill Denham in a report said the rise in funding rates was triggered by the settlement of the primary market auction sales and repayment of N30.6 billion and N14.8 billion, respectively.

Along with movements in other components of the system liquidity, liquidity improved to a deficit of N67.3 billion from a deficit of N90.4 billion yesterday.

Bond Rate Slides as Fixed Income Market Stays Quiet
Patience Oniha, Director-General, Debt Management Office

Meanwhile, on the short end of the fixed income market, the Nigerian Treasury Bill and the open market operation (OMO) benchmark curve closed flat at 6.14% and 9.24% respectively.

The outturn is contrary to the expectation that there would be bullish interest in the secondary Treasury bill space on the back of many investors losing out of the auction yesterday.

In the secondary bond space, the benchmark bond curve compressed by 7 basis points to 12.93%, driven by bearish sentiments on the long and intermediate end of the curve.

At the Treasury bill auction conducted yesterday, the CBN sold N30.6 billion worth of treasury bills across the different maturities (91-day: N1.6 billion; 182-day: N1.1 billion; 364-day: N27.9 billion).

Chapel Hill Denham said the bid-to-cover ratio was 9.5X which explains why many investors lost out of the auction. While the 91- and 182-day stop rates cleared at the previous level, the 364-day stop rates cleared lower at 9.40% compared to 9.64% at the previous auction.

In a related development, Naira appreciated by 12 basis points or 50 kobo in the Investors and Exporters market and by 1.83% or 9 Naira in the parallel market.

This was triggered by the CBN asserting that they would increase the supply of FX for travel expenses despite strong declined in external reserves to $33.82 billion.

Bond Rate Slides as Fixed Income Market Stays Quiet

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