Bonds, Treasury Yields Jump as Naira Falls

Bonds, Treasury Yields Jump as Naira Falls

The average yield on Federal Government of Nigeria (FGN) bonds and Treasury bills inched higher on Thursday as a result of selloffs in fixed income instruments. Spot rates repricing has started redefining movement in the yield curve as Nigeria’s headline inflation rate is projected to rise further.

Inflation condition continues to widen negative real returns on fixed income instruments but this may likely reverse after 150 basis points benchmark interest rate hike by the Central bank of Nigeria (CBN) monetary policy committee.

In the money market, short term rates decline as a result of improved liquidity in the financial system, causing the average interbank rate slowdown, according to market data.

Today, data from FMDQ Exchange shows that the overnight lending rate contracted by 83 basis points to 6.2%, which analysts attribute to the absence of pressures on the financial system.

Meanwhile, the Nigerian naira depreciated by 0.1% to N419.50 per the United States in the Investors and Exporters foreign (FX) window again. The local currency is suffering from high demand for foreign currencies despite lower export receipts in the year.

In a market note, Cordros Capital analysts said trading activities in the Treasury bills secondary market were bearish with selloffs of short-duration instruments. The trading pattern impacted the curve as the average yield expanded by 7 basis points to 3.9%, according to traders’ notes.

Across the curve, Cordros Capital said the average yield declined at the short (-14bps) end following buying interest in the 56-day to maturity (-71bps) bills.

But yield expanded at the mid (+23bps), and long (+11bps) segments as investors sold off the 98-day to maturity (+53bps) and 252- day to maturity (+22bps) bills, respectively. Elsewhere, the average yield was unchanged at 4.4% in the open market operations (OMO) segment.

In the bond segment, trading activities on FGN bonds in the secondary market closed with mixed sentiments, albeit with a bearish tilt, traders said in a report. READ: Yield Inched Higher as Investors Sell FGN Bonds

The average expanded by a basis point to 11.1%. Across the benchmark curve, market reports show that the average yield expanded at the short (+5bps) end as investors sold off the JAN-2026 (+15bps) bond.

Meanwhile, yield pared at the mid (-1bp) segment as investors demanded the JUL-2020 (-2bps) bond. The average yield closed flat at the long end. # Bonds, Treasury Yields Jump as Naira Falls