Bonds, Treasury Trade Low as Inflation Sparks Concerns
Federal Government Bonds and Nigerian Treasury bills (NTB) instruments yields were near steady levels as the market weighs the impacts of rising headline inflation on naira assets. The worsening inflation rate is noted to have reduced the real return on investment book.
In what appears as a consensus, MarketForces Africa noted that a large number of investment banking, securities and asset management firms have estimated that real rate on investment assets has been weakened at the time the market is seeing pressures on the exchange rate.
Meanwhile, the Nigerian local currency depreciated further at the Investors’ and Exporters’ foreign exchange (FX) window, according to data from FMDQ Exchange checked by MarketForces Africa.
The naira depreciated by 0.2% to N446.67 amidst rising demand for the United States. In the money market, short-term rates have started trending upward over liquidity squeeze in the financial system.
The Open Buyback Rate (OPR) and the Overnight Lending Rate (OVN) rose 84 basis points and 67 basis points to 16.17% and 16.50%, respectively – in the absence of any significant inflows into the system.
In the secondary market for trading Nigerian Treasury bills, activity level ended on a quiet note with pockets of transactions recorded in the space. READ: Yield Rises 8bps as Sell Pressures Hit FGN Eurobond
Consequently, the average yield was unchanged at 10.6%, according to traders. Similarly, the average yield was flat at 10.2% in the OMO bills segment. The value of FGN bonds was relatively bullish for mid and long-dated debt instruments as investors traded cautiously, Cowry Asset said in a note.
Analysts noted that the average secondary market yield cleared higher marginally by two basis points to 14.49%. It was noted that the 27-MAR-2050 instrument was the best performer. Across the benchmark curve, Cordros Capital noted that the average yield increased at the short (+3bps) and mid (+6bps) segments.
The surge was linked to profit-taking activities on the FEB-2028 (+8bps) and APR-2029 (+8bps) bonds, respectively. Conversely, the average yield contacted at the long (-2bps) end as investors demanded the MAR-2050 (-9bps) bond.
In the foreign debt capital market, the value of the FGN Eurobond closed bullish for all maturities tracked by Cowry Asset Management over positive sentiment. Traders said the average yield was muted as it closed at 11.51%. # Bonds, Treasury Trade Low as Inflation Sparks Fear
