FGN Bonds Face Sell Pressures as CBN Hikes T-Bills Rates
The market prices of the Federal Government of Nigeria (FGN) bonds declined as investors offloaded naira assets due to higher rates on treasury bills instruments sold at a recent primary market auction by the Central Bank.
In the fixed interest securities market, yields have remained elevated ahead of the inflation figure. The statistics office is expected to release inflation figures for January this week, and analysts have predicted that the consumer price index would worsen further after another round of Naira devaluation via FX spot rate pricing methodology adjustment by FMDQ.
In the just concluded week, the domestic bond market traded southward as the significant yield repricing in the T-bills segment lured investors away, traders at Afrinvest said in an update. The selloffs were supported by higher spot rates pricing at the Treasury bills auction conducted by the apex bank where the authority sold 364-day bills for 19%.
A total of 52,338 units of FGN bonds valued at N51.123 million were traded in 31 deals compared with a total of 98,426 units valued at N95.304 million transacted in 60 deals in the previous week, Cedrus Capital said in a note.
Consequently, daily trade ended in the red on all trading days save for a flat outing on Friday, pushing the average yield 96 basis points higher to 15.7% week on week, traders said. The short-end bonds saw the most selloffs as the average yield increased by 156 basis points while the yield on the mid and long-end bonds climbed 48 and 88 basis points respectively.
Asset managers, authorised dealers and other market players exited short positions following hints from the CBN Governor about potential increases in short-term interest rates. As a result, the average yield climbed, while FGN bond prices declined.
Across the benchmark curve, the average yield expanded across the short (+127bps), mid (+30bps), and long (+78bps) segments. The shift in the yield curve was due to the profit-taking activities on the MAR-2024 (+471bps), JUN-2033 (+118bps) and APR-2034 (+227bps) bonds, respectively.
Traders said they expect money policy administration globally and domestically, and sustained imbalance in the demand and supply dynamics to shift yields upwards over the short term. #FGN Bonds Face Sell Pressures as CBN Hikes T-Bills Rates High Cost: Table, and Sachet Water Producers Close Shop in Enugu