Nigeria’s Debt Securities Rates Slump amid Unsettle Economic Dust
The direction of the yield curve continues to reverse in the Nigerian local debt capital market amidst unsettling clouds of dust in the economic environment. The local economy has been battered with issues, including scarcity of new naira notes and fuel scarcity ahead of Nigeria’s inflation figure release.
Nigeria’s inflation rate printed at 21.34% in December 2022 following a moderate decline in month-on-month reading attributed to the base effect. Across the nation, scarcity of new naira notes has forced local banks to shut down operations while economic activities slump in some cities.
Assets managers have been pumping money into government instruments to lock down funds which are already exposed to high inflation rate and weak local currency.
A large number of fixed interest income market analysts attribute rallies on government debt instruments to large liquidity in the financial system and the fact that there is a lack of alternative investment windows.
Money goes to where it is treated well, but the local market has proven the saying wrong as an investment in naira assets remain exposed to downsides: high inflation and weak naira especially.
With a robust funding size, investors continue to queue at the Central Bank of Nigeria (CBN) primary market auction, giving the apex bank an open cheque to reduce spot rates across tenor bills.
On Thursday, trading activities in the Nigerian Treasury bill market were bullish again. The average yield contracted by seven (7) basis point to 1.48%.
Across the curve, the average yield closed flat at the short and long ends, but declined at the mid (-33bps) segment following participants’ interest in the 119-day to maturity (-98bps) bill, Cordros Capital wrote to clients.
Similarly, the average yield contracted by 27 basis points to 1.9% in the OMO bills segment while money market rates steadied over sizeable funding size in the financial system.
Data from FMDQ Exchange show that short-term benchmark rates: the open repo rate (OPR) and the overnight lending rate stayed stable at 10.50% and 10.81%, respectively.
Market see rates steady amid N200 billion debit for net Nigerian Treasury bills issuance by the apex bank on Wednesday auction conducted. Meanwhile, proceedings in the FGN bond secondary market were bullish, as the average yield contracted following buying interest.
Across the benchmark curve, the average yield dipped at the short (-33bps) end following investors’ demand for the MAR-2025 (-173bps) bond but closed flat at the mid and long segments.
FGN bonds remained largely flat for the majority of maturities but with a bullish tilt. The average secondary market yield decreased by 10 basis points to 13.02%.
The 20-year paper was 11 basis points richer, with yields falling to 15.89% (from 15.91%). Notably, the 10-year, 15-year, and 30-year debt yields remained constant at 13.11%, 14.59%, and 15.10%, respectively.
Elsewhere, the value of the FGN Eurobond increased for most of the maturities amid sustained bullish sentiment. Notably, the average secondary market yield contracted to 12.02%. #Nigeria’s Debt Securities Rates Slump amid Unsettle Economic Dusts
