Yields on Nigeria’s Bonds, Treasury Mixed as Naira Falls

Yields on Nigeria’s Bonds, Treasury Mixed as Naira Falls

The average yield on Nigerian Government debt instruments moved in mixed directions amidst depreciating local currency. Following monetary policy tightening that started in May this year, the rates on government bonds and Treasury bills have been increased, reflecting the change in market dynamics,

Fixed income traders said higher spot rates offering become necessary to heat up investors’ interest in the Nigerian debt instruments, noting that higher inflation rate has clouded real return on portfolios holdings.

In the money market, short-term rates declined amidst robust liquidity levels in the financial system, forcing cash-rich local banks to re-price interbank rates.

As such, the Nigerian interbank offered rate fell across the board for all the maturities, according to Cowry Asset Management. Analysts said banks with liquidity sought lower rates in the money market ahead of the primary market auction (PMA) of the Central Bank of Nigeria (CBN) on Wednesday.

It was noted that short-term benchmark rates: Open Repo (OPR) and the Overnight Lending Rate (OVN), narrowed to 10.63% and 10.88%, respectively.  The overnight lending rate actually contracted by 188 basis points to 10.88% in the absence of funding pressure.

In the secondary market for Nigerian Treasury bills, trading activities swung in solo mode as participants anticipated tomorrow’s PMA. Thus, the average yield on Nigerian Treasury instruments was unchanged at 11.0%,

Across the curve, Cordros capital analysts stated that the average yield closed flat at the short and mid segments but pared at the long (-1bp) end. The yield movement came following demand for the 329-day to-maturity (-1bp) bill.

Similarly, fixed income traders reported that the average yield was unchanged at 10.1% in the OMO bill segment.

In the bond market, the prices of FGN Bonds remained relatively flat for the bulk of maturities examined despite the average secondary market yield expanding further by 2 basis points to 14.32%, Cowry Asset analysts said in a note.

The yield on the 10-year bond, the 20-year bond, the 15-year bond, and the 30-year bond stayed unchanged at 14.03%, 14.75%, 15.88%, and 14.72%, respectively. READ: Bonds, Treasury Yields Mixed amid Interest Rate Hike Expectation

According to Cordros Capital analyst, across the benchmark curve, the average yield contracted at the short (-1bp) end as investors demanded the APR-2023 (-4bps) bond.

It was noted that yield expanded at the mid (+7bps) segment due to profit-taking activities on the APR-2029 (+9bps) bond while the average yield was flat at the long end.

Elsewhere, the value of the FGN Eurobond decreased for all maturities tracked amid renewed bearish sentiment. Hence, the average yield expanded by 21bps to 11.72%, according to traders.  # Yields on Nigeria’s Bonds, Treasury Mixed as Naira Falls