Fixed Income Market Trades Mixed as MPC Holds Meeting
The fixed income market records mixed results on Monday as the Central Bank of Nigeria (CBN) monetary policy committee (MPC) holds its first meeting in the New Year.
Investors in the fixed income market traded calmly, though analysts have projected that there would be no rate hike surprise as monetary authority are expected to prioritise growth over the December inflation rate jump.
In its macroeconomic projection for 2022, CardinalStone hinted that the CBN may turn fully hawkish. Plan to borrow N480 billion by the Debt Management Office (DMO) in the first quarter could drive yield repricing.
In the first half of 2021, due to the increased issuance of debt instruments, spot rates increased by about 5% on average until the market was repressed in the second half. Nigeria is expected to split the total raise to finance budget deficit for 2020 in 70 to 30 between local and foreign borrowings.
In the money market, the average interbank rate declined due to the absence of liquidity pressures in the financial system at the beginning of the week.
The overnight lending rate dropped off 675 basis points to close at 8.50 per cent as against the last close of 15.25 per cent, according to data from the FMDQ Exchange platform.
It was noted that the open repo rate also decline by 700 basis points to close at 8.00 per cent compared to 15.00 per cent on the previous day. In the secondary market, the Nigerian Treasury Bills closed on a flat note with the average yield across the curve remaining unchanged at 4.54 per cent.
The 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 analysts’ notes.
In the open market operations (OMO bills) market, the average yield across the curve decreased by 55 basis points to close at 5.12 per cent as against the last close of 5.67 per cent.
FSDH Capital said it noted that the average yield across the short-term maturities was compressed by 111 basis points. However, the average yield across the long-term maturities remained unchanged at 5.82 per cent.
OMO 1-Feb-22 (-221 bps) maturity bill witnessed heavy buying interest. FGN bonds secondary market closed on a mildly positive note today, as the average bond yield across the curve cleared lower by 4 basis points to close at 11.76 per cent from 11.80 per cent on the previous day.
Average yields across short tenor and medium tenor of the curve decreased by 2 basis points and 10 basis points, respectively. 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 24 basis points, FSDH Capital stated in its note, adding that the secondary bond market is likely to remain subdued in the short term. # Fixed Income Market Trades Mixed as MPC Holds Meeting
Read: T-Bills Yield Falls 2 Basis Points as Naira Holds Position
