Treasury Yield Prints 3.4% as Bond Tracks Higher

Treasury Yield Prints 3.4% as Bond Tracks Higher

The average on the Nigerian Treasury bills was flattish on Monday due to thin trading recorded in the secondary market after a series of spot rates price down at the primary market auctions.

However, the bond market experiences a marginal upward yield adjustment that follows a bearish trading session. Similarly, the OMO bill tracked lower likewise the yield on FGN Eurobond instruments in the internal debt capital market.  

Despite a steep headline inflation rate, fixed income investors continue to earn negative real returns on their portfolios, helped by low interest rate environment engineered by the Central Bank of Nigeria in 2019.

A recent report by the National Pension Commission, PENCOM, revealed that a large number of pension fund administrators’ dumped the fixed income market early in 2022 with high risk banks placements. 

In the somewhat quiet trading session, Nigerian Treasury Bills secondary market ended in a low beat, though traders at Alpha Morgan Capital hinted about traction seen at the mid and longer end of the curve.

Consequently, the average rate remained flat for the sixth consecutive session to close at 3.45%, traders said in a market note. READ: Bond Yield Tracks Higher as Naira Appreciates to N416

Meanwhile, the money market rates adjusted upward on account of liquidity strain in the financial system. To put it succinctly, there was funding pressure in the money market that triggered an upward movement in rates.

On Monday, the average interbank rate climbed by 9 basis points to close at 4.84% as the Open Buy Back rate was up by 17 basis points while the overnight rate remained flat to close at 4.67% & 5.00%, respectively.

Following a primary market auction conducted by the CBN last week with rates steadied across tenored, trading activities at the OMO bills segment was a bit cold as the average yield declined by 11 basis points to 3.8%.

At the bond market, there was sell pressure on the federal government of Nigeria, FGN, instruments across the curve, resulting in a moderate increase in the average yield.

Traders noted that activities at the FGN bond segment was calm with a slightly bearish undertone as traction was seen on the 2026s, 2034s, 2036s, 2037s, 2042s, and 2050s maturities.

As a result, the average yield climbed slightly by 1 basis point to close at 10.40%. Activities at the FGN Eurobond market sustained the bullish trend from the previous session, following demands across all ends of the curve except for the Jun 2022 instrument that saw some sell-side pressure. 

Traders’ note shows that the average yield was down by 4 basis points to close at 7.79%. #Treasury Yield Prints 3.4% as Bond Tracks Higher