Yields on Treasury, OMO Bills Steady as Bond Clears Lower
Average yields on Treasury and Open Market Operations (OMO) bills stayed flattish on Monday while Federal Government bonds shed a basis point. The fixed income market has stayed cold due to unimpressive real returns and a drastic slowdown in debt instruments issuance by the Federal Government of Nigeria.
Headline inflation rate declining month on month, and a low interest rate environment has kept upward yield repricing tight while robust financial system liquidity keeps demand strong at primary market auctions conducted by the Central Bank and Debt Management Office.
But market witnessed a reverse last week at the bond auction spot rate witnessed a jump at the long end of the curve.
Analysts have also projected a cold outturn in the fixed income market as investors are expected to trade cautiously ahead of Central Bank monetary policy committee decision on the benchmark interest rate and other parameters. In the money market, short term interest rates were reduced on Monday, according to data from FMDQ Exchange.
The reduction in short term rates was driven by healthy financial system liquidity. Consequently, the average interbank rate dropped by 284 basis points to close at 16.67%, according to Alpha Morgan Capital note.
The reduction occurred as the overnight lending (O/N) rate decreased by 3.00 per cent to close at 17.00 per cent as against the last close of 20.00 per cent, and the Open Buy Back (OBB) rate decreased by 2.67 per cent to close at 16.33 per cent compared to 19.00 per cent on the previous day.
Today, the Nigerian Treasury Bills secondary market closed on a flat note with average yield across the curve remaining unchanged at 5.10 per cent, analysts said in separate notes.
According to fixed income analysts’ note, average yields across short-term, medium-term, and long-term maturities closed flat at 3.96 per cent, 4.80 per cent, and 5.82 per cent, respectively. In the OMO bills market, the average yield across the curve closed flat at 5.48 per cent, said FSDH Capital in a market report.
Average yields across short-term, medium-term, and long-term maturities remained unchanged at 5.36 per cent, 5.54 per cent, and 6.04 per cent, respectively. Similarly, FGN bonds secondary market closed on a calm note as the average bond yield across the curve cleared lower by 1 basis point to close at 8.43 per cent from 8.44 per cent on the previous day.
Average yield across the short tenor of the curve declined by 1 basis point. However, the average yields across medium tenor and long tenor of the curve remained unchanged. FSDH Capital said the FGNSB 14-APR-2023 and FGNSB 14-MAY-2023 bond were the best performers with a decrease in the yield of 4 bps each.
Meanwhile, the 18-MAR-2036 maturity bond was accorded the worst performer title with an increase in yield of 7 basis points. The secondary bond market is likely to remain subdued as market participants lookout for the MPC meeting results, FSDH Capital said. # Yields on Treasury, OMO Bills Steady as Bond Clears Lower
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