Treasury Tumbles 41 Basis Points as CBN Keeps Policy Rates
Trading activities in the Nigerian Treasury Bills space ends on a bullish note as the average yield tumbles 41 basis points to 6.3% as Central Bank keeps policy rates.
The monetary policy maintains the status quo on benchmark interest at 11.5%. Today’s decision marks the fifth time the committee would hold rates as CBN adopts a pro-growth stance.
In a market report, Cordros Capital Limited said average yield contracted 79 basis points at the short, 7 basis points at mid and 33 basis points at long segments.
Analysts added that market participants demanded for the 79 days to maturity bill sees 83 basis points decline, 184-day to maturity witnessed 62 basis drop and 338 days to maturity sheds 80 basis point respectively.
Similarly, the market data showed that the average yield at the open market operations (OMO) segment also tapered by 2 basis points to 8.6%
Elsewhere, the overnight lending rate expanded by 50 basis points to 16.3%, as funding pressures outweighed inflows worth N16.84 billion from open market operations maturities.
In the bond space, trading in the secondary market was mixed, however, with a bullish tilt. Following market reactions to MPC decision, average yield spiral downward 9 basis points bps12.0%.
Cordros analyst said across the benchmark curve average yield contracted at the short (-35bps) end due to demand for the JAN-2022 (-61bps) but expanded at the long (+5bps) end due to sell-off of the MAR-2050 (+20bps) bonds; the mid-segment closed flat.
“We do not envisage any fundamental changes in the dynamics of the fixed income market”, Cordros Capital said while reacting to CBN decision on key rates.
The investment firm added that bond investors are likely to maintain the strategy of playing at the short to medium segments of the yield curve with careful selective positioning on long-dated instruments.
“With the increased returns on fixed deposits and upside risks to inflation on the horizon, we expect investors to resist the Debt Management Office (DMO) attempt to bring down rates at bond auctions substantially to improve inflation-adjusted returns”.
Read Also: Nigerian Economy Tumbles 1.9%, Analysts Differ on Outlook
However, analysts said they believe the market will be paying close attention to future data on inflation, the FG’s financing plan for the recently signed N982.73 billion 2021 Supplementary Appropriation Bill and the plan of the FG to secure foreign currency borrowings to determine the path of monetary policy and the extent of domestic debt issuances by the DMO.
Treasury Tumbles 41 Basis Points as CBN Keeps Policy Rates
