Bonds, T-Bill Rates Slide as Funding Pressures Remain High
Bonds, Treasury bill yields compressed on Monday as Nigerian debt market records mixed sentiment in the space, a development that analysts linked to renewed appetite for duration apathy.
Amidst the quiet activities in the fixed income space, funding pressures remained broadly elevated on Monday as the market reopened for the new trading week.
Struggling to buck the liquidity squeeze that has persisted, the financial system opened in a deficit of N71.0 billion, according to Chapel Hill Denham, from a deficit of N22.5 billion on Friday.
Notwithstanding, analysts said funding rates moderated, albeit marginally. Specifically, market data shows that the open buy-back and overnight rates eased by 25 basis points apiece to 14.50% and 15.00% respectively.
Chapel Hill Denham revealed that N60 billion worth of open market operations (OMO) bills will mature on Tuesday, which analysts think should help bolster liquidity.
In the fixed income market, sentiments were mixed. At the front end of the curve, the Nigerian treasury bill benchmark curve closed lower by an average of 5 basis points to 4.30%.
Fixed income analysts at Chapel Hill Denham said in a report that this was mainly due to downward repricing of rates at the long (-15bps to 6.28%) end of the curve.
Meanwhile, OMO curve expanded by an average of 11 basis points to 8.10%.
In the bond market, analysts explained that the benchmark curve compressed by an average of 1 basis point to 13.21%, due to renewed appetite for duration.
This move led to yield compression at the intermediate (-4bps to 13.41%) and long (-9bps to 14.02%) end of the curve, while short-term yields (+13bps to 11.91%) moderated.
On Wednesday, the Federal Government of Nigeria’s (FGN) primary market activity is expected to resume with a scheduled rollover Treasury bill auction.
At the auction, the FGN will be looking to raise N117.6 billion worth of bills, split across three maturities: 91-day (N24.7 billion), 182-day (N10.0 billion), and 364-day (N82.8 billion).
The last auction cleared at 2.0%, 3.5%, and 9.75% across the three tenors, respectively. Chapel Hill Denham said odds are in favour of the 364-day stop rate printing at 10% at the upcoming auction.
In a related development, the Nigerian local currency continued to trade within a tight band at all segments of the foreign exchange (FX) market.
In the Investors and Exporters Window, the local currency weakened against the United States dollar (USD) by 0.08% or 33 Kobo to close at N410.67.
In The parallel market, Naira traded flat against the USD at N483.00. Similarly, the exchange rate remained unchanged in the Official and Secondary Market Intervention Sale (SMIS) segments at N379.00 and N380.69 respectively.
Bonds, T-Bill Rates Slide as Funding Pressures Remain High
