Yield Rise to 11.65% as Bondholders Dump FGN Bonds
The average yields on fixed income instruments closed mixed midweek following selloffs on short to long-dated federal government securities and thin trading activities on the Nigerian Treasury bills.
Conversely, the market experienced selloffs in the FGN Bonds with the yield curve trending higher. Caught between a rising inflation rate which printed at 18.60% and a weaker local currency, fixed income market investors are absorbing a 100 basis points interest rate hike in July to reprice returns on naira-denominated assets.
Fixed income analysts indicate in their market report that the average yield on the federal government instruments inched upward again midweek as a result of selloff pressures amidst the Debt office’s plan to raise N720 billion in the third quarter of 2022.
The market has been in a bearish mode largely in recent times following pressure on financial system liquidity which has been impacting the transaction levels in fixed interest securities. Money market weak liquidity occurred due to low maturities and FAAC disbursements.
Short-term rates in the money market made an upward adjustment while some local banks struggle to meet cash demand. This had resulted in reduced Treasury bills held by investors. At the close of the market, analysts said the average interbank rate climbed further by 48 basis points to close at 14.92%.
The increment seen on money market instruments was driven as the Open Buy Back rate expanded by 45 basis points to 14.83%. Similarly, the overnight lending rate inched forward by 50 basis points to 15.00%.
Elsewhere, the average yield expanded by 159 basis points to 9.0% in the OMO bills segment. In the secondary market for treasury bills, trading activities ended on a flattish note. Following a thin trading outing, the average rate remained flat to close at 6.83%.
Yesterday in the fixed income market, gilt-edged investors’ sold off some bonds amidst Nigeria’s rising interest and inflationary worries. Alpha Morgan Capital reported that the FGN bond secondary market was somewhat in a bearish mood as sell-side activities were witnessed along the short and long-dated maturities.
As a result, the average yield was up by 12 basis points position to close at 11.65%. In the contrast, traders said further that participants in the FGN Eurobond space traded on a bullish note. READ: Nigerian Bourse Ends Lower as Investors Dump More Stocks
The International debt capital market saw a modest rebound in investors’ appetite for riskier assets and demand for the safe haven currency, according to Alpha Morgan Capital following the European Central Bank’s potential rate hike & ease in the dollar.
Trading records show that the average yield was down by 50 basis points to close at 13.56% while the Nigerian naira depreciated against the United States dollar at the Investors’ and exporters’ FX window to N426.58. # Yield Rise to 11.65% as Bondholders Dump FGN Bonds
