Nigeria Bonds, Market Rates Climb over Liquidity Hassle
Nigeria’s financial system liquidity remains tight and the trend is setting a new course for asset managers who set to optimize portfolio returns. Borrowings from the Central Bank of Nigeria’s (CBN) standing lending facility continue to impact liquidity.
Deposit money banks need to meet their respective liquidity requirements. Thus, their respective market actions it to stay glued to the borrowing window, or unpack their investment in government bills.
Both appear to be happening at the same time following changing money pricing dynamics that followed the interest rate hikes.
The FGN Bond market traded on a quiet note on Tuesday, although with a bearish tilt, according to fixed income analysts’ notes shared with their clients. Analysts told MarketForces Africa that a handful of trades passed through, most of which were offers submitted on Apr-29 (+26bps) maturity.
As a result, the average benchmark yield climbed 2 basis points higher to close at 14.21%. The bulls retained their hold on the Eurobond market, although mild profit-taking activities at the short spectrum tamed the bulls.
Notably, Nov-25 (-27bps) and Nov-27 (-27bps) maturities established the 6bps dip in average yield to 11.79%. Traders said 10-year, 15-year, 20-year, and 30-year FGN Bonds yields remained steady at 12.72%, 14.75%, 15.30%, and 15.65%, respectively.
Elsewhere, the 10-year US Treasury yield cleared 5bps lower to 3.43%. The liquidity dilemma kept local banks on the sidelines at the Nigerian Treasury bills and open market operations (OMO bills) secondary markets.
As a result, the average benchmark yield closed largely unchanged at 8.05% and 4.01%.
Yesterday, system liquidity opened strongly with ₦114.03 billion, however, TrustBanc Capital Limited analysts said activities of deposit money banks at CBN’s short-term funding windows submerged the system into a deficit of ₦61.08 billion.
As expected, Open Repo and Overnight rates added about 87 basis points to close at 18.63% and 18.75%, respectively. TrustBanc said given the sustained liquidity thirst of Deposit Money Banks, it expects funding rates to remain elevated.
In the absence of any significant credit to the system, analysts at TrustBanc Capital said they are expecting trading sentiment in the fixed income space to remain bearish. # FGN Bonds, Market Rates Climb over Liquidity HassleNaira Lost 11% as Banks Issue New Update on FX Spending
