Treasury, Bonds Yields Rise as CBN Hikes Interest Rate
The average yield on fixed income securities adjusted upward as the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) hikes benchmark interest by 150 basis points to 13% after two years of dovish stance.
Fixed income investors have been waiting for catalysts to drive yield repricing amidst a rising headline inflation rate that continues to temper returns of portfolios.
Nigeria’s hot inflation rate widened real return on fixed income instruments but lately, the yields curve swung but not enough to cover the rate of increase in the price level. READ: Central Bank of Nigeria Hikes Interest Rate to 13%
Spot rates on Treasury bills and Federal Government of Nigeria (FGN) bonds issued by government agencies (CBN, DMO) experience seesaw movements in the first quarter of the year –especially.
Strong demand for Nigeria Treasury bills due to robust liquidity in the financial system in Q1 was noted to be responsible for low spot pricing in the period, according to analysts. In the money market, the average interbank rate ends flattish on Tuesday as both overnight lending and repo were steadied – relatively.
Market data shows that the overnight lending rate remained flat at 12.5%, despite the N30 billion inflow from the open market operations (OMO bills) maturities. Meanwhile, trading activities in the Nigerian Treasury Bills secondary market were bearish as the average yield expanded by 3 basis points to 3.7%.
Across the curve, Cordros capital said in a market report that the average yield contracted at the short end (+3bps. This happened following demand for the 93-day to maturity (-15bps) bill.
But, yield expanded at the long (+9bps) end as participants sold off the 184-day to maturity (+62bps) bill, according to Cordros Capital. Conversely, the average yield was flat at the mid-segment. Elsewhere, the average yield expanded by 10 basis points to 4.1% in the OMO segment.
In the FGN Bonds secondary market, trading activities with bullish sentiments as the average yield contracted by 2 basis points to 11.0%. Across the benchmark curve, traders said the average yield expanded at the short (+3bps) end as investors took profits off the APR-2023 (+9bps) bond.
But, yield contracted at the mid (-10bps) segment following demand for the APR-2029 (-17bps) bond. The average yield was flat at the long end. #Treasury, Bonds Yields Rise as CBN Hikes Interest Rate
