Fixed Income Market Trades Quiet Ahead of DMO Bond Auction
Trading activities across fixed interest instruments were unaltered Tuesday ahead of the Debt Management Office (DMO) primary market auction for the Federal Government of Nigeria (FGN) bond.
On Wednesday, the DMO will offer Nigeria’s government bond worth ₦150 billion through re-opening of 10-year (₦75 billion) and new 20-year (₦75 billion) tenors.
According to the bonds issuance document, the settlement will take place on January 21. Market maintains positive expectation about subscription as headline inflation rate inched higher, according to data from the National Bureau of Statistics.
Increased inflation rate pressures to 15.63% in December widened the negative rate on fixed income instruments as some traders projected that rates would be volatile in the pre-election year. Meanwhile, liquidity pressures eased in the money market as short term interest rates adjusted downward in the absence of funding burden.
The average interbank rate dropped by 213 basis points to close at 12.75%, following contractions at both the Open Buy Back rate and Overnight rate, according to Alpha Morgan Capital note.
data from the FMDQ Exchange shows that the overnight lending rate declined by 225 basis points to close at 13.00 per cent as against the last close of 15.25 per cent. Also, the Open Repo rate dwindled by 2.00 per cent to close at 12.50 per cent compared to 14.50 per cent on the previous day.
As system liquidity has improved with OMO repayment of ₦128.18 billion, the money market rates are likely to remain subdued, barring any mop-up activity by the Central Bank (CBN), FSDH Capital said in its note.
In the secondary market, Nigerian Treasury bills closed on a flat note with the average yield across the curve remaining 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, analysts note show.
In the OMO bills market, the average yield across the curve closed flat at 5.62 per cent. Average yields across short-term and long-term maturities remained unchanged at 5.52 per cent and 5.71 per cent, respectively
Today, trading activities on FGN bonds closed on a flat note today, as the average bond yield across the curve closed flat at 11.80 per cent in the secondary market.
Analysts note also showed that average yield across the short tenor increased by 2 basis points, while the average yield across the long tenor of the curve decreased by 1 basis point. However, the average yield across the medium tenor of the curve remained unchanged.
The 26-APR-2049 maturity bond was the best performer with a decrease in the yield of 8 basis points, while the 27-APR-2023 maturity bond was the worst performer with an increase in the yield of 7 basis points, according to FSDH Capital. # Fixed Income Market Trades Quiet Ahead of DMO Bond Auction
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