Bonds, T-Bills Steady as Inflation Worsens Returns on Naira Assets
Trading activities on Federal Government of Nigeria (FGN) bonds and Treasury bills were relatively quiet on Monday as the inflation rate spiked. This kept the average yield in limbo as the market witnessed a cold trading session following Debt Management Office’s primary market auction.
In the Investors and Exporters foreign exchange window, the Nigerian naira depreciates further by 0.1% to N430 per the United States dollar due to demand pressures by manufacturing concerns.
Today, the National Bureau of Statistics, NBS, reported that headline inflation surged 105 basis points to 19.64% in July, from 18.60% in June as the food index worsened.
Though the fixed income market has seen an upward yield repricing due to interest rate hikes, analysts said rising inflation has further worsened investors’ return on naira assets.
In the money market, short-term interest rates jumped due to the resurgence of liquidity pressures in the financial system. Market data indicates that the average interbank rate climbed by 175 basis points to close at 14.25% on Monday.
This happened as data from the FMDQ Exchange platform shows that the open buy back rate inched forward 200 basis points to 14%. Also, overnight lending sees a 200 basis points increase to 14.50%.
In the treasury bills space, trading activities in the secondary market were calm with mixed interests seen along the curve, according to Alpha Morgan Capital note. Overall, the average rate retained its prior position to close at 7.67%, traders said.
Across the curve, Cordros Capital said the average yield contracted at the short (-1bp) and mid (-1bp) segments following buying interests on the 24-day to maturity (-1bp) and 101-day to maturity (-1bp) bills, respectively; but closed flat at the long end.
Similarly, the average yield contracted slightly by a basis point to 11.1% in the open market operations (OMO bills) segment.
On Monday, the average yield on FGN Bonds remained flat to close at 12.69% because trading activities were muted as participants placed their attention on the Debt Management Office’s primary market auction for bonds. READ: Nigerian Bourse Closed in Red as Inflation Worsens
Also, the FGN Eurobond space opened the week on a calm note as investors took profit in today’s trading session. In sum, the average rate was up by 5bps to close at 10.57%, according to Alpha Morgan Capital. # Bonds, T-Bills Steady as Inflation Worsens Return on Naira Assets
