Yields Track Lower over Buying Interest in Bills, Bonds

Yields Track Lower over Buying Interest in Bills, Bonds

The average yields across the fixed income market segments trim lower midweek following pockets of buying interest on Nigerian government instruments. In the treasury bills secondary market, trading activities were relatively cold as the Central Bank of Nigeria (CBN) conducted its weekly primary market auctions.

Thus, market participants focus shifted to auction proceeding with an expectation that the apex bank will price spot rates higher amidst increasing pressures on push forward by changing market dynamics.

Interest rate have been adjusted upward three times starting from May as some analysts are projecting a further rate hike in November 2022 as the CBN tightens monetary policy to fight the worrisome inflation level at 20.52%.

Naira assets exposure to a jumping inflation rate has increased while the local currency is losing its store of value feature due to persistent weakening in the foreign exchange market.

Pre-election spending and expectation of higher demand for dollars are among notable downsides for the Nigerian financial markets, making an investment in naira assets an unimpressive adventure.

Rising inflation rate consistently impacts real return, worsen by weakening in the naira exchange rate. In the money market, liquidity position in the space has forced short-term rates upward.

Yesterday, the overnight lending rate was flat at 16.75%, as the system liquidity closed lower at a net short position N63.07 billion, according to analysts at Cordros Capital Limited.

Whereas, trading activities in the Treasury bills secondary market settled on a quiet note as participants shifted focus to the outcome of the CBN auction. Thus, the average yield stayed flat at 7.3%.

Similarly, traders said in their separate notes on Wednesday that the average yield on the instruments was unchanged at 10.3% in the open market operations (OMO) bills segment. READ: Average Yield on Treasury Bills Closed Flat at 1.45%

Elsewhere, buying activities were seen in the secondary market for trading Nigerian government bonds. The average yield contracted by a basis point to 13.5%, a reversal from 13.6% prints earlier in the week.

Across the benchmark curve, Cordros Capital analysts said in a market report that the average yield dipped at the short (-8bps) end due to the demand for the MAR-2025 (-34bps) bond.

However, yields expanded at the mid (+5bps) and long (+3bps) segments following selloffs of the APR-2032 (+11bps) and JUL-2034 (+19bps) bonds, respectively. #Yields Track Lower over Buying Interest in Bills, Bonds

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