Market to Trade Cagily as Investors Await Triggers for Yields Repricing

Market to Trade Cagily as Investors Await Triggers for Yields Repricing

Analysts at Chapel Hill Denham Limited have said that the fixed income market will continue to trade cautiously as investors await triggers for potential downward or upward repricing of yields.

In the money market yesterday, as expected, funding pressures eased further, as financial system liquidity opened at ₦262 billion as against N281bn in the previous day.

However, liquidity was further bolstered by open market operations (OMO) maturities estimated at ₦321.48 billion.

The Open Buy Back (OBB) and Overnight (OVN) rates declined by 2.17% and 2.08% to 2.50% and 3.25% respectively. We expect funding pressures to remain benign, barring a major liquidity outflow.Market to Trade Cagily as Investors Await Triggers for Yields Repricing

Meanwhile, Chapel Hill stated that sentiments were mixed in the fixed income market as investors continued to trade cautiously.

At the front end of the curve, discount rates on benchmark Nigerian Treasury (NTBs) bills expanded by an average of 6 basis points (bps) to 2.36%.

some_text

The expansion was driven by repricing of mid-day to maturity (DTMs) which rises +10bps to 2.09%, against flattish short and long DTMs.

Also, in the OMO segment, bullish sentiments persisted, as the benchmark curve compressed by an average of 8bps to 2.89%, driven by short (-47bps to 2.43%) and mid (-4bps to 2.91%) DTMs, respectively.

In the bond market, Chapel Hill explained that duration apathy persisted as the market remains on edge.

Read Also: Fixed Income Market Records Mix Performance amid Rising Inflation Concern

Long duration bonds advanced by an average of 2bps to 7.99%, while short and intermediate bonds compressed by 1bp and 6bps to 5.79% and 8.12% respectively.

As a result, the benchmark curve expanded by an average of 2bps to 7.99%.

“We expect the market to continue to trade cautiously, as investors await triggers for potential downward/upward repricing of yields”, Chapel Hill stated.

In a related development, the exchange rate (offer) closed flat at ₦440.00 Thursday, while the naira weakened by 0.06% or 25 kobo to ₦386.25.

Liquidity has improved momentarily in the I&E Window, due to recent interventions by the CBN to gauge the level of FX backlog.

Analysts said t is unclear how and when the CBN will clear the backlog as the nation’s external reserves settled at US$35.67 billion.

Market to Trade Cagily as Investors Await Triggers for Yields Repricing