Yields on Bonds Plunged across Benchmark Tenors to 3.68%

Yields on Bonds Plunged across Benchmark Tenors to 3.68%

In the debt market, bond yields compressed by an average of 28 basis points (bps) across benchmark tenors to 3.68% Wednesday.

Analysts at Chapel Hill Denham stated that this was mainly driven by short duration drop of 88 bps to 1.90%.

Although the 30-year benchmark bond 19 bps to 6.93% rallied, indicating that duration apathy may be easing.

Similarly, front end rates traded largely upbeat, as discount rates on benchmark open market operations (OMO) bills eased by an average of 19bps to 0.34%.

Meanwhile, market data showed that the Nigerian Treasury Bill curve was also flat at 0.56%.

“The renewed interest in duration is not surprising to us”, Chapel Hill Denham stated in a commentary.

However, the investment firm thinks it is too early to call the end of the bond rally despite the recent volatility in the oil market.

This is because liquidity backdrop remains supportive in the near term.

Chapel Hill Denham said the supply of bonds will likely remain thin until the DMO begins to implement the 2021 deficit financing plan, at which point we expect yields to stabilise.

In the money market, interbank funding pressures remained benign today due to robust liquidity in the financial system.

However, money market rates rose mildly but remained stuck at low single-digit in view of the liquidity backdrop.

Notably, the Open Buy Back (OBB) and Overnight (OVN) rates rose marginally by 13 bps and 21 bps to 0.63% and 1.04% respectively.

“We expect funding pressures to remain benign until Friday when the CBN is scheduled to hold its bi-weekly retail FX auction”, analysts said.

Over all, the fixed income market sustained bullish momentum today as investors continued to position at the short end of the curve.

In a related development, exchange rate continued to trade within a tight band at the regulated segments of the FX market Wednesday.

The currency pair closed flat at 386.00 and ₦379.00 in the I&E Window and official window respectively.

However, pressures persisted in the currency market, as the naira weakened by 0.22% or ₦1.00 against the USD to ₦464.00.

The nation’s external reserves stood at US$35.65 billion on 03 November 2020.

Yields on Bonds Plunged across Benchmark Tenors to 3.68%