Foreign Investors Dump Nigeria OMO Bills Ahead of Repayment
The average yield on Nigerian Treasury bills and OMO papers surged during the week due to significant sell pressures witnessed in the secondary market. Portfolio rebalancing and downbeat investors’ sentiment boosted yields on short-term borrowing instruments.
Specifically, foreign portfolio investors and local deposit money banks trimmed their interest in OMO bills ahead of N1.44 trillion repayment next week.
Due to sustained yield tightening and spot rates priced down amidst a firming naira, investors offloaded their positions, with large offers particularly seen in the OMO segment.
Investors exited positions amidst anticipated disinflation, which is expected to encourage downward benchmark interest rate adjustment at the monetary policy committee in Nov.
Declining returns will force some banks and foreign investors to trim their interest portfolio across short-term instruments, with notable sell-offs in Treasury and OMO papers.
The market anticipates that the Central Bank is more likely to conduct an open market operation due to NGN1.44 trillion repayment from OMO maturities next week.
Thus, the average yield across all instruments increased by 24 bps week on week to 19.6%, according to Cordros Securities Limited. By segment, Nigerian Treasury bill yields increased by 2 bps to 17.5%, while OMO yields advanced by 50 bps to 22.1%.
Fixed income market analysts said they expect the significant inflows coming into the system next week to drive demand for bills, likely resulting in a moderation in yields. #UBA Grows Profit by 2.3% to N538bn, Bucks Negative Earnings Trend
