Fixed Income Market Trades Flat after Two Weeks Long Rally
Fixed income market traded largely flat today, as investors’ took a breather following a breathtaking two weeks long rally.
At the front end of the curve, the Nigerian Treasury Bills and Open Market Operations benchmark curves expanded marginally by a basis point apiece to 0.45% and 0.56%, as most benchmark maturities closed flat.
Financial system liquidity opened higher at ₦484.5 billion from ₦100.7 billion yesterday.
This reflects inflows from bond coupon payments worth ₦47 billion and Open Market Operations maturities worth ₦336.09 billion.
As a result of that, money market rates dropped substantially, as the Open Buy Back (OBB) and Overnight (OVN) rates declined by 500bps and 450bps to 1.00% and 1.75% respectfully.
Another net Nigerian Treasury Bills maturity is expected on Thursday (₦20bn), and analysts expect funding pressures to remain benign throughout the week.
In the bond market, yields declined marginally at the short (-1bp to 2.75%) and mid (-3bps to 3.65%) end of the curve.
This offsetting a mild uptick in yields at the long (+4bps to 5.52%) end of the curve.
As a result, average yield across the benchmark curve closed flat at 3.95%.
Analysts at Chapel Hill Denham stated a Treasury bill auction is scheduled to hold Wednesday to partly rollover maturities worth ₦154 billion.
Meanwhile, Debt Management Office is scheduled to offer ₦134 billion, split between 91-day (₦29.8bn), 182-day (₦10.6bn), and 364-day (₦93.9bn) tenors.
The previous auction cleared at 1.00%, 1.00%, and 2.00% respectively.
“In our view, the blend of heavy demand and relatively thin supply should push auction clearing rates to record low levels of sub-1%”, Chapel Hill Denham said in a note.
Meanwhile, foreign exchange rate continued to trade within a tight band at the regulated segments of the FX market today.
Exchange rate closed flat at ₦360.00 in the Investors and Exporters Window and ₦379.00 in the official window.
Similarly, the pair traded flat at 463.00 in the parallel market as external reserves dropped 0.2% month to date to US$35.68 billion.
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Fixed Income Market Trades Flat after Two Weeks Long Rally
