Yield on Nigerian Govt. Bond Advanced ahead of DMO Auction

Yield on Nigerian government Bond advanced two basis points as pressure ease on interbank rates amidst liquidity tightening in the financial system ahead of Treasury Bills auction.

Continuing from last week, the financial system liquidity remained constrained today, opening in the deficit of N274 billion, albeit a slight improvement from a deficit of N280 billion on Friday.

However, interbank funding rates moderated slightly, due to bond coupon payments estimated at N113 billion that hit the financial system. As a result, the Open Buy Back and Overnight rates closed lower by 213bps and 250bps to 13.75% and 14.25% respectively.

“We expect funding pressures to ease further tomorrow, due to an additional bond coupon inflow and open market operations (OMO) maturities”, Chapel Hill Denham said in market report.

Adding that the firm expects money market rates to remain elevated at double-digit, due to the strong possibility of liquidity mop-up by the Central Bank (CBN) later in the week.

Overall, the fixed income market traded largely flat. At the front end of the curve, the Nigerian Treasury bill (NTB) and OMO benchmark curves closed flat at an average of 4.23% and 7.16% respectively.

Similarly, bond yields advanced marginally across the benchmark curve by an average of 2bps to 12.42%, due to further pressures at the belly of the curve.

On Wednesday, a rollover NTB auction is scheduled to hold as the DMO, via the CBN, is expected to offer N88.5 billion, split across three tenors: 91-day (N11.4 billion), 182-day (N6.0 billion), and 364-day (N71.1 billion) bills.

Recall the last auction cleared at 2.0%, 3.5% and 9.0% respectively.

In the foreign exchange market, the Nigerian local currency, Naira, continued to trade within a tight band at all segments. In the Investors and Exporters Window, Naira closed flat against the United States dollar at N410.00.

Also, exchange rate remained unchanged in the official and Secondary Market Intervention Sale (SMIS) segments at N379.00 and N380.69 respectively while the pair traded flat at N485.00 in the parallel market.

Yield on Nigerian Govt. Bond Advanced ahead of DMO Auction