Yields on Debt Securities Mixed Ahead of CBN Auction
The average yields on Naira denominated debt securities in the fixed income market were mixed on Tuesday ahead of the Central Bank of Nigeria (CBN) primary market auction (PMA). Trading activities were relatively cold as the market awaits the outcome of the Central Bank policy committee meeting that ended today.
While the market awaits fresh catalysts to drive yield repricing, MPC decided not to challenge the existing status quo in favour of economic growth – benchmark interest rate was sustained at 11.50%.
After reaching an agreement to keep the status quo on policy rate with the monetary policy committee, the Central Bank is scheduled to conduct an auction to roll over Nigerian Treasury bills maturities worth ₦129.33 billion.
The Treasury bills to issue included 91-day (₦2.68 billion), 182-day (₦3.54 billion), and 364-day (₦123.11 billion) tenors. MPC concluded the two days meeting sustaining the benchmark interest rate at 11.50% while other parameters are held untouched.
Robust liquidity in the financial system continues to drag short term rates downward. Money market rates track lower Tuesday as financial system liquidity improved with OMO repayment of ₦110.00 billion. The average interbank rate dropped by 658 basis points to close at 1.68%, following contraction at both the Open Buy Back rate and Overnight rate.
Data from FMDQ Exchange shows the overnight lending rate decreased by 665 basis points to close at 1.85 per cent as against the last close of 8.50 per cent. Also, the Open Repo (OPR) rate decreased by 650 basis points to close at 1.50 per cent compared to 8.00 per cent on the previous day.
In the foreign exchange market, Naira appreciated by 0.01 per cent as the dollar was quoted at ₦416.33 as against the last close of ₦416.38. Most participants maintained bids between ₦410.00 and ₦444.00 per dollar, according to FSDH Capital.
In the secondary market for Nigerian Treasury Bills, trading activities closed on a flat note with the average yield across the curve remaining unchanged at 4.54 per cent.
FSDH Capital noted that average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.50 per cent, 4.11 per cent, and 5.21 per cent, respectively. In the OMO bills market, the average yield across the curve closed flat at 5.12 per cent, according to analysts fixed income market notes.
Similarly, the average yields across short-term and long-term maturities remained unchanged at 4.41 per cent and 5.82 per cent, respectively.
FGN bonds secondary market closed on a positive note today, as the average bond yield across the curve cleared lower by 14 basis points to close at 11.62 per cent from 11.76 per cent on the previous day.
Average yields across short tenor, medium tenor, and long tenor of the curve decreased by 15 basis points, 29 basis points, and 2 basis points, respectively.
The 26-APR-2029 maturity bond was the best performer with a decrease in the yield of 47 basis points, while the 18-JUL-2034 maturity bond was the worst performer with an increase in the yield of 14 basis points.
FSDH Capital stated that the secondary bond market may witness an uptick in trading activities in the short term due to improved system liquidity. #Yields on Debt Securities Mixed Ahead of CBN Auction
Read: Debt Investors See Mixed Yields Ahead of DMO, CBN Auctions
