Fixed Income Investors Stay Bullish on Government Securities

Fixed Income Investors Stay Bullish on Government Securities

In the fixed income market, investors sentiments were broadly bullish on Tuesday, despite persistent funding pressures in the interbank market.

Analysts at Chapel Hill Denham said investors continued to grapple with the prospect of thin supply of government securities against elevated demand.

However, at the front end of the curve, discount rates on Nigerian Treasury Bills (NTBs) and open market operations (OMOs) were broadly unchanged.

Both settled at an average of 2.54% and 4.63% respectively. However, Chapel Hill Denham said the bond market was more active.

Fixed Income Investors Stay Bullish on Government Securities

The bullish run was due to yields repriced which lower across benchmark tenors by an average of 39 bps to set a new multi-year low of 8.44%.

Meanwhile, short term bonds recorded the steepest compression.

It dropped off 73 bps to 5.21%, followed by intermediate bonds which slashed 23 bps to 8.59%, and long term bonds shed 22 bps to 10.74%.

“In the near term, the prospect of thin supply of securities, will likely continue to pressure yields lower, until the CBN begins to increase supply of OMO bills”, Chapel Hill Denham stated.

Policy Rate Cut Unlikely to Move Yields in Fixed Income Market

At an investor forum hosted by Citi today, the Minister of Finance, Zainab Ahmed, noted that Nigeria will not be seeking for debt relief from commercial and bi-lateral lenders.

Chapel Hill Denham said while this is credit positive, and favourable for Nigerian foreign currency, FCY, bonds, it could imply further pressure on the naira for debt servicing obligations.

Also, in the foreign exchange market, the USD/NGN depreciated by 63 kobo (-16 bps) at the Investors and Exporters window (IEW) to ₦386.63, and weakened by ₦5.0 (1.1%) to 460 in the parallel market.

The currency pair was unchanged at ₦361.00 and ₦380.69 at the official and SMIS windows, respectively.

The external reserves stood at US$36.26 billion having dropped by 0.9% month to date as at 22 June 2020.

Fixed Income Investors Stay Bullish on Government Securities


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