Fixed Income Market Trades Cold Ahead of MPC Meeting

Fixed Income Market Trades Cold Ahead of MPC Meeting

The average yields on all fixed income market securities closed flattish on Friday as investors’ trade cautious ahead of the Central Bank of Nigeria (CBN) monetary policy committee (MPC) meeting scheduled for January 24, and 25, 2022.

In the money market, average interbank rates gave up an early slowdown at the end of the week.

Due to pressures on the financial system liquidity, the overnight lending rate increased by 375 basis points or 3.75 per cent to close at 15.25 per cent as against the last close of 11.50 per cent, according to data from FMDQ Exchange.

Also, the Open Repo rate increased by 400 basis points to close at 15.00 per cent compared to 11.00 per cent on the previous day. In the secondary market for Nigeria Treasury Bills, trading activities at the space closed on a flat note as average yield across the curve remain unchanged at 4.54 per cent.

Average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.50 per cent, 4.11 per cent, and 5.21 per cent, respectively, according to FSDH Capital note.

In the OMO bills market, the average yield across the curve ended the week flattish at 5.67 per cent. Average yields across short-term and long-term maturities remained unchanged at 5.51 per cent and 5.82 per cent, respectively.

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As the fixed income market awaits catalysts to drive yield repricing on instruments, trading activities on Federal Government bonds in the secondary market ended flattish on Friday – demand was cold on expectation for benchmark interest rate adjustment.

FGN Bond market sees average yield across the curve closed flat at 11.79 per cent, it had hit 7.80 per cent this week before its shed a basis points following Debt Management Office (DMO) primary market auction.

FSDH Capital note shows that the average yield across the short tenor of the curve decreased by 1 basis point, while the average yield across the medium tenor of the curve increased by one basis point.

However, the average yield across the long tenor of the curve remained unchanged. The 22-JAN-2026 maturity bond was the best performer with a decrease in the yield of 3 basis points, while the 23-FEB-2028 maturity bond was the worst performer with an increase in the yield of 10 basis points, analysts note show.

At FGN Savings Bond Auction for January 2022, the DMO allotted bonds worth ₦537.65 million across the 2-year (₦154.21 million) and 3-year (₦383.44 million) tenors at coupon rates of 7.542 per cent (+22 bps) and 8.542 per cent (+22 bps), respectively.

Allotment for 2-year bonds increased by 55.74 per cent compared to ₦99.02 million allotted in the last auction, while allotment for 3-year bonds increased by 88.85 per cent versus ₦203.04 million allotted in the previous auction. #Fixed Income Market Trades Cold Ahead of MPC Meeting

Read: Analysts Expect Flattish Rate on FG Bonds as DMO Plans Auction

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