Yields on Treasury, Bonds Steady amidst Unsettled Market Dynamics
The average yields on fixed income market securities ended flattish on Monday following a thin trading session. Yields jerked upward last week due to spot rates repricing at a primary market auction conducted by the Central Bank of Nigeria – CBN.
Monetary Policy Committee of the CBN is expected to keep rates after it had booked 150 basis points in May. The apex bank will keep rates steady, analysts told MarketForces Africa, saying a more hawkish stance would dent economic growth.
Key macroeconomic indexes are unfavourable to economic growth, analysts said while maintaining that there will be a balance between equity and gilt-edge investments in the third quarter.
Higher inflation rate and worsening local currency have been picked as having a negative influence on fixed income returns. Analysts said they expect a further increase in spot pricing to match macroeconomic uncertainties in the financial markets.
The financial system liquidity has been strained and some analysts expect short-term rates to worsen. To meet their respective liquidity requirement, traders told MarketForces Africa local banks had exited the Treasury bills market.
Somehow, the liquidity strain filters through the new week as the average interbank rate climbed by 8 basis points to close at 14.00%. Also, the Open Buy Back rate expanded by 17 basis points to 14% while the Overnight rate remained flat at 14%.
In the treasury bills secondary market, trading activities were relatively quiet, resulting in a flattish yield curve. The market closed with an average rate of 6.71%. Across the curve, Cordros Capital hints that the average yield contracted at the short (-1bp) end, following demand for the 24DTM (-1bp) bill; but was flat at the mid and long segments.
Elsewhere, the average yield was flat at 7.4% in the OMO segment. Also, analysts noted that trading activities at the FGN bond secondary market were mixed as pockets of transactions were seen along the curve.
As a result, Alpha Morgan Capital said the average yield retained its previous position to close at 11.48%. Across the benchmark curve, analysts said the average yield was flat at the short and mid segments but expanded at the long (+1bp) end as investors sold off the MAR-2035 (+6bps) bond.
At the international debt capital market, participants in the FGN Eurobond space started the week on a bullish note following last week’s sentiments from Fed as market expects a 75bps rate hike planned for July, against a sharper rate hike of 100bps.
Thus, the average yield was down by 77 basis points to close at 14.08%, Alpha Morgan Capital told investors via email. Today, the naira gained 0.28% against the U.S. Dollar at the Investors and Exporters FX Window to close at N429.13. # Yields on Treasury, Bonds Steady amidst Unsettled Market Dynamics
