Yields Rise as Sell Pressures Hit Bonds, T-Bills

Yields Rise as Sell Pressures Hit Bonds, T-Bills

The average yield on the Nigerian Treasury Bills and Federal Government (FGN) bonds rise on Thursday as investors take profit on short-duration instruments. Trading data shows that sell pressures hit the fixed income market, causing the average yield to heat up amidst a slowdown.

Lower trading records keep the yield curve flatten as the equity market starts picking up after downturns. Meanwhile, short-term rates moderated in the money market despite weak inflow into the financial system.

Investing in the fixed income market instruments exposes cash to the hefty inflation rate and uncertainties around foreign exchange rates. Data from the FMDQ Exchange platform shows that the overnight lending rate contracted by 13 basis points to 14.0% on Thursday.

The open buy back also declined, causing a drag on the average interbank rate. In the secondary market for Treasury bills, trading activities ended on a bearish note as the average yield expanded by 3 basis points to 4.7%. READ: Stocks Drop as Uncertainty over Naira Assets Fuels Sell-offs

Across the curve, Cordros Capital said in a market report that the average yield expanded at the short (+6bps) and mid (+3bps) segments due to profit-taking on the 49-day to maturity (+45bps) and 154-day to maturity (+14bps) bills, respectively.

However, the average yield on Treasury instruments was noted to close flat at the long end as a result of a thin trading record. Elsewhere, the average yield was unchanged at 5.2% in the open market operations (OMO bills) segment, according to traders’ notes.

FGN Bonds yield felt the impacts of selloff by bondholders in the secondary market on Thursday after the primary market auction conducted early in the week. Trading activities also closed mixed in the space, although with a bearish tilt, as the average yield expanded slightly by a basis point to 11.1%.

Across the benchmark curve, the average yield closed flat at the short and long ends but expanded at the mid (+2bps) segment as investors sold off the FEB-2028 (+6bps) bond, according to Cordros Capital traders. #Yields Rise as Sell Pressures Hit Bonds, T-Bills