Bond Yield Rises to 13.04% as CBN Hikes Interest Rate
The fixed income market traders reacted with selloffs on mid and long-dated government bonds in the local market as the Central Bank of Nigeria monetary policy committee increased the benchmark interest rate to 15.5%.
The interest rate came as expected following a persistent rise in headline inflation, printing at 20.52% in August, according to data from the statistics office.
Fixed securities traders have been expecting catalysts to drive yield upward as the return on naira assets is exposed to inflation and weak local currency.
With the cash reserve ratio hike to 32.5%, analysts said the CBN directly moved to reduce banking system liquidity and, in the process, tried to forestall the impact of speculative dollar demand activities on inflation
Analysts told MarketForces Africa inflation rate will worsen in October but the interest rate hike will have minimal impact on the consumer price index as a result of structural deficiency that requires reforms.
In the money market, short-term rates reduce as liquidity position improves. Market data shows the average interbank rate dropped by 25 basis points to close at 14.50%. READ:Nigerian Exchange Inches Higher as MPC Sustains Rates
Despite the inflow from OMO bill maturities worth N132.28 billion, the overnight lending rate was steady at 14% while the Open Buy Back rate dropped by 50 basis points to 15.00%.
In the Treasury bills market, analysts said trading activities were cold. The thin trading session keeps the average yield flattish at 7.20%.
In the secondary market, Alpha Morgan Capital said in a note that FGN bonds traded with mixed sentiments as buying interests were seen at the short end of the curve while sell-side pressures were seen at the mid and long ends of the curve during today’s trading session. The average yield increased by 14 basis points to settle at 13.04% as a result.
At the investors’ and exporters’ foreign exchange window, the Nigerian local currency, the naira, depreciated by 0.1% to N436.33 as the market begins to price in interest rate adjustment.
# Bond Yield Rises to 13.04% as CBN Hikes Interest Rate#
