Treasury Bills Yield Rises, FGN Bond Hits 10.75%

Treasury Bills Yield Rises, FGN Bond Hits 10.75%

The average yield on Nigerian Treasury bills witnessed sell pressures midweek as holders dump instruments which lifted the average yield two basis points. Similarly, bondholders see price decline amidst heavy selloffs while yield jumped seven basis points to 10.75%.

The current yield level in the bond market is one of the peaks it has reached in 2022 as some fixed income traders expect a replay of higher rates on debt market instruments seen in the first half of 2021.

Largely in the current year, the average yield on instruments trading in the fixed income market has remained subdued as a result of the liquidity position that continues to help drive higher subscription levels in the primary markets by government agencies.

In the first quarter of 2022, spot rates on Nigerian Treasury bill primary market auctions conducted by the Central Bank of Nigeria (CBN) were repriced downward across the curve.

A similar scenario was witnessed in the primary market auction conducted by the Debt Management Office (DMO) for reopenings bond instruments; just as rates open market operations (OMO) bills were also down priced.

At the press time, fixed income market participants are anticipating the result of today’s primary market auction conducted by the apex bank. Though traders have projected a robust subscription level as the first quarter winds up but expectation about spot movement remains unclear.

In the money market, the average interbank rate climbed by 42 basis points to close at 5.08% following liquidity strain in the financial system. Market data shows that the Open Buy Back rate remained flat and the Overnight rate climbed by 33 basis points and 50 basis points individually to close at 4.83% and 5.33%, respectively.

Fixed income market yields have been unimpressive due to sustained negative real return on investment which has also been further pressured by a rising headline inflation rate.

Today at the Nigerian Treasury bills secondary market, trading activities ended on a calm note, albeit, with a bearish undertone following sell-side pressures seen on the Apr-2022, Jun-2022 & Mar-2023 papers.

Traders at Alpha Morgan Capital said in a note that the average rate climbed by two basis points on Wednesday to close at 3.21%. Across the curve, the average yield was flat at the short and mid segments, Cordros Capital traders said in its note.

The firm said a sell-off of the 344-day to maturity (+30bps) bill led to the yield expansion at the long (+4bps) end of the curve. Elsewhere, the average yield was unchanged at 3.6% in the open market operations (OMO) segment.

Today, FGN bond secondary market was bearish as the Jun-2027, Nov-2028, and Nov-2030 maturities saw the most traction as well as some selling pressures seen on the Apr-2023, Jan-2026, Mar-2027, Mar-2036, Jul-2045 & Mar-2050 maturities, Alpha Morgan Capital note shows. 

As a result, the average yield expanded by seven basis points to close at 10.75%. Cordros Capital said across the benchmark curve, the average yield expanded at the short (+16bps), mid (+5bps), and long (+2bps) segments as investors sold off the APR-2023 (+71bps), FEB-2028 (+6bps), and MAR-2050 (+21bps) bonds, respectively.

While the exchange rate closed steady in the investors’ and exporters’ foreign exchange window, activities at the FGN Eurobond space were mostly bearish.  Traders spot sell-side pressures across the sovereign curve except for the Jun-2022 & Jul-2023 instruments that witnessed some demands.

Consequent to the selloffs, the average yield on FGN Eurobonds was slightly up by a basis point to close at 7.70%. READ: FGN Eurobond Yield Falls Four Basis Points to 7.54%

The naira remained flat against the United States dollar at the official FX Window to close at N417.00. #Treasury Bills Yield Rises, FGN Bond Hits 10.75%

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