Sell Pressures Push Bond Yield Higher 16bps, T-bills Ends Quiet

Sell Pressures Push Bond Yield Higher 16bps, T-bills Ends Quiet

Sell pressures on the Federal Government of Nigeria (FGN) bond lifted the average yield higher by 16 basis points, while Treasury bills ends quietly in the secondary market amidst uncertainties in the macroeconomic condition.

In the second quarter, Debt Management Office is expected to increase borrowing from the local debt capital market following a signal that the market has priced the Eurobond rate higher, especially given the emerging market Central Bankers are adjusting interest rates upward to curb the rising inflation rate.

While waiting for catalysts to drive rates higher, the fixed income market has remained unimpressive but for a lack of alternative investment options for local investors – both retail and institutional.

Pension Fund Administrators have shunned the Treasury market for example while using retirement savings to fund banks’ balance sheets as operators hunt for treasures.

In the money market, the average interbank rate dropped by 330 basis points to close at 7.13%, and both open buy-back and overnight lending rates were priced downward.

Data from FMDQ Exchange shows that the Open Buy Back rate inched lower by 317 basis points to 7% as financial system liquidity remains robust. Similarly, the overnight rate declined by 342 basis points to close at 7.25%.

In the secondary market, Nigerian Treasury bills were traded in a cautious mood. Traders spotted pockets of transactions at the mid to long end of the curve. Consequently, the average rate retained its prior position to close at 3.23%, according to Alpha Morgan Capital note.

Across the curve, Cordros Capital hints that the average yield contracted at the short (-16bps) end as market participants demanded the 52 day to maturity (-79bps) bill, but expanded at the long (+4bps) end following profit-taking on the 206 day to maturity (+33bps) bill.

Elsewhere, activities at the FGN bond secondary market were calm with a bearish undertone on Monday as the average yield climbed by 16 basis points to close at 10.83%. Following unchanged spot rates at the Central Bank of Nigeria (CBN) open market operation (OMO) auction last week, the average yield was unchanged at 3.6% in the secondary market today.

Meanwhile, FGN Eurobond was mostly bullish today following buying interests across the sovereign curve except for the Jun-2022 instrument that witnessed some sell-side pressures.

Alpha Morgan Capital said in a market report that the average yield was slightly down by two basis points to close at 7.67%.

Across the benchmark curve, Cordros Capital said the average yield expanded at the short (+4bps), mid (+30bps), and long (+19bps) segments, due to selloffs of the MAR-2027 (+28bps), JUL-2030 (+31bps), and MAR-2036 (+36bps) bonds, respectively. #Sell Pressures Push Bond Yield Higher 16bps, T-bills Ends Quiet