Fixed Income Market Trades Flat as DMO Roll over Maturing Bills

Fixed Income Market Trades Flat as DMO Roll over Maturing Bills

Fixed income market traded flat yesterday amidst rising headline inflation rate which has further widened negative return on government instruments.

The Debt Management Office (DMO) however issued ₦158.7 billion to partly roll over maturing bills worth ₦178.7 billion.

However, interbank funding rates eased further yesterday, as financial system liquidity opened higher at ₦195 billion from ₦192 billion in the previous day.

The Open Buy Back and Overnight rate declined by 90 basis points (bps) and 120 bps to 3.50% and 4.00% respectively.

Chapel Hill Denham expectation is that money market rates would remain subdued in subsequent sessions as liquidity will likely remain buoyant.Fixed Income Market Trades Flat as DMO Roll over Maturing Bills

Meanwhile, two additional bond coupons are expected this week estimated at about ₦90 billion, and a large open market operations (OMO) maturity worth ₦350 billion is scheduled for today.

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Analysts explained that the performance in the fixed income is not unconnected with the fact that the Nigerian Treasury Bill (NTBs) primary market auction was underway.

Read Also: Bonds: Yields across Benchmark Tenors Drop as Inflation hits 28-month high

At the front end of the curve, discount rates on benchmark NTBs were unchanged at an average of 1.73%.

On the other hand, Chapel Hill said the OMO curve expanded by 3 bps, as interest in mid (-2bps to 2.27%) and long (-9bps to 2.43%) day to maturity (DTMs) was offset by upward repricing of short DTMs (+20bps 2.39%).

In the bond market, the average yield on benchmark tenors was unchanged at 7.23%.

Equally, at the NTB primary market auction (PMA), the Debt Management Office (DMO) offered ₦158.7 billion to partly rollover ₦178.7 billion maturing bills.

Subscription level was decent at ₦204.2 billion, implying a bid-to-cover ratio of 1.3x (2.0x previously), while the auction cleared lower by an average of 2bps to 1.88%.

The DMO allotted ₦2.0bn of 91-day at 1.09% (-1bp), ₦8.39bn of 182-day at 1.50% (-5bps), and ₦148.36bn of 364-day at 3.05% (unchanged).

In a related development, pressures persisted in the parallel market as the dollar to Naira ask rate depreciated by ₦5 or 1.1% to ₦465.

In the I&E Window, the local currency continues to trade within a tight band, and closed flat at ₦386.00.

Fixed Income Market Trades Flat as DMO Roll over Maturing Bills