T-Bills Steady as Yield on FGN Bond Hits 12.70%

T-Bills Steady as Yield on FGN Bond Hits 12.70%

Investors in the fixed income market have raised the bar by demanding inflation-protected returns on their investment placement, showing apathy at the bonds reopening auction conducted by the Debt Management Office.

At the auction, the subscription level was unimpressive, thus forcing Nigeria’s debt office to raise marginal rates across bonds instrument classes for three, ten and 20 years.

The debt capital market has been under pressure following interest rate hikes while headline inflation continues to widen. Though for investors, it costs money to keep money; the market is riding on tight liquidity and higher inflation which exposed naira assets to risk.

In the money market, data from the FMDQ Exchange platform indicates that the average interbank rate climbed by 50 basis points to close at 14.75%. This resulted from higher short-term interest rates driven by tight liquidity as the Central Bank also adjusted rates on savings deposits to 4.2%.

Then, the Open Buy Back rate and Overnight rate both climbed by 50 basis points apiece to close at 14.50% and 15.00%, respectively amidst lower maturities.

Analysts believe that the Central Bank of Nigeria (CBN) cash reserve ratio is putting pressure on the local banks’ liquidity position. This has led to large participation in the apex bank standing lending facility. READ: FBNH lifts performance bar, grows earnings on improve assets quality


Meanwhile, trading activities in the secondary market for Nigerian Treasury bills remain tight, cold and quiet as a thin transaction was observed in the space. With a relatively flattish transaction, the average yield was unchanged at 7.67%.

After a cold outing at the DMO bonds auction, there was a mixed sentiment in the secondary market for trading FGN bonds – with a bearish tilt. As a result, the average yield climbed by three basis points to close at 12.72% yesterday.

The market is expecting yield repricing to spark further due to adjustments in the money pricing rate. This signal a move into an era where banks pitch their tents at the fixed income market to drive earnings performance upward.

The risk is now incessant cash reserves ratio debit which has a negative impact on liquidity. # T-Bills Steady as Yield on FGN Bond Hits 12.70%

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