Nigeria’s Bonds, T-Bills Yields Sink Deep, Money Market Rates Rise
The average yield on Nigeria’s debt instruments spirals downward as large funds flow into short and long tenored instruments amidst tight liquidity in the financial system.
Trading activities in the fixed income space tightened with reverse yield movements on short and long-dated financial instruments. In the money market, financial conditions in the space pushed short-term rates high into double-digit highs.
Lack of sufficient Inflows from maturing instruments amidst debit for Treasury and FX auctions impacted liquidity position. Both overnight and open buy back rates jerked up significantly with a strong jump in interbank rates.
In the preceding week, short-term rates in the money market had dropped to double-digit low regions on account of an influx of funds into the financial system.
On Friday, the overnight lending rate expanded by 63 basis points to 16.5%, which the Cordros Capital analysts attribute to the absence of any significant inflows into the system.
In a market report, analysts at Cordros Capital hint that trading activities in the secondary market for Nigerian Treasury bills ended with bullish sentiments. This implies market participants lock their funds into Treasury bills buying after spot rates adjustment seen in the primary market auctions.
With the buying side development, the average yield contracted by 250 basis points to 8.5%. Invariably, Treasury bills yield has dropped by 2.6% in the latter part of the year, from more than 11% early in November 2022. Across the curve, Cordros Capital analysts said the average yield dipped at the short (-407bps), mid (-149bps) and long (-246bps) segments.
The investment banking firm analysts said in their weekly notes that market participants demanded the 59-day to-maturity (shedding 632bps), 112-day to-maturity (which dropped by 292bps), and the 273-day to-maturity (declining by 375bps) bills, respectively.
Elsewhere, the average yield was flat at 10.1% in the open market operation (OMO) bills segment, according to fixed income market analysts. A similar trading pattern was spotted in Nigeria’s bond market amidst macroeconomic uncertainties in the Nigerian economy.
The average yield on FGN bonds slackened as investors’ position in the FGN bond last week. The bullish trading outrun dragged the average yield downward by 26 basis points to 14.0%. READ: NASD Loss Widens as Unlisted Companies Stocks Sink
Across the benchmark curve, analysts said the average yield contracted at the short (-64bps) and long (-3bps) ends following buying interest in the APR-2023 (-318bps), and MAR-2036 (-23bps) bonds, respectively.
The average yield closed flat at the mid-segment, according to a slew of analysts’ trading notes. #Nigeria’s Bonds, T-Bills Yields Sink Deep, Money Market Rates Rise
