Fixed Income Market Trades Cold as Yields Repricing Slowdown

Fixed Income Market Trades Cold as Yields Repricing Slowdown

The fixed income space sustained its cold trading outing Tuesday amidst a slowdown in yields repricing projection ahead of the Central Bank of Nigeria auction scheduled for Wednesday. 

Investment analysts at Atlass Portfolios said in a report that as the inflation rate began to take a decline, they expect the yields in the fixed income market to slow down in the month of June.

On the front-end, the Nigerian Treasury Bill benchmark curve closed flat 6.04% according to Chapel Hill Denham’s market report as investors await the auction slated to hold this week.

The open market operations benchmark curve however saw a weak jump, expanded by a basis point to 9.31% on as open market operations maturities worth N80 billion hit the system.

Fixed Income Market Trades Cold as Yields Repricing Slowdown
Naira

The open market operations repayment worth N80 billion actually offset the spike in borrowings from the Standing Lending Financing (SLF) window, analysts informed. This resulted in a marginal dip in system liquidity to N101.4 billion from N112.4 billion on Monday.

With market reacting to the offsetting events, the Open Buy Back (OBB) rate closed flat at 14.33% while the Overnight (O/N) rate increased by 17 basis points to 14.67%; reacting to the demand pressures in the SLF window.

In the bond space, Chapel Hill Denham said there were demand interest on the Mar-2035 and selling interest on the Mar-2024 and Mar-2025, resulting in a 1bps expansion of the curve to 13.03. Across the other maturities, the bond space was quiet.

“We expect investors to continue to hold their liquidity to bid in the upcoming Nigerian Treasury Bill auctions”, the investment firm said.

The yield curve continues to tend towards being flat as yields on the front rates spike relative to longer maturities.

In the foreign exchange market, the Nigerian local currency, Naira, sheds 0.10% or 10 kobo to close at N411.50 on Tuesday as FX market participants clamoured for higher liquidity.

The parallel market closed flat at N502.00, close to the N500 perceived Naira-USD ceiling as external reserves slid to US$34.10 billion on 7th June from US$34.17 billion on 4th June.

“We anticipate further pressure on the naira amidst the recent devaluation of the naira by the CBN and decline in the Nigeria Foreign Reserve”, Atlass Portfolios said.

Fixed Income Market Trades Cold as Yields Repricing Slowdown