Bonds, T-Bills Prices Drop on Sell Pressures, Naira Hits N431
The average yield on Nigerian Treasury bills cleared at 7.5% ahead of the Central Bank primary market auction on Wednesday, traders note show. At the Investors and Exporters foreign exchange window, the Naira worsened to N431 to a United States dollar.
Meanwhile, the liquidity position in the financial system remains under pressure as short term interest rates adjusted upward. As of Monday, liquidity in the financial system closed in a net short position at N78.94 billion, according to Cordros Capital.
Due to this worsening position in the system, the average interbank rate expanded by 13 basis points to close at 14.88%, according to Alpha Morgan Capital note.
This followed an increase in the Open Buy Back rate which climbed by 25 basis points to 14.75% while the Overnight rate remained 15.00%. In the secondary market for trading treasury bills, transactions were in quiet mode along the curve.
Overall, traders said the average rate retained its previous position at 7.52% ahead of the CBN auction on Wednesday. Treasury holders would hold on to their current position as the apex bank is set to roll over some N150 billion maturing bills on Wednesday.
Meanwhile, the average yield contracted by 3 basis points to 11.1% in the open market operations (OMO bills) segment, according to traders’ notes reviewed. READ: Bonds Cleared Lower as Yields on Treasury, OMO Bills Steady
A slew of fixed income traders said told MarketForces Africa in what appears as a consensus that market players are waiting for further increases in spot rates repricing due to an expectation that inflation would rise further.
Recall that MarketForces Africa reported that a 40 basis points increase in consumer price index would lift inflation to 19% from 18.60% due to unsettled clouds of dust in the macroeconomic space while the exchange rate remains unstable.
The market condition has worsened returns on naira assets despite fewer alternative investment windows. In the secondary market, trading activities on FGN bonds ended on a bearish note. As a result, the average yield was up by 17 basis points to close at 12.42%.
Across the benchmark curve, Cordros Capital hints that the average yield expanded at the short (+31bps) and mid (+22bps) segments as investors sold off the MAR-2027 (+60bps) and APR-2029 (+41bps) bonds, respectively. Conversely, the average yield closed flat at the long end.
Elsewhere, Alpha Morgan Capital said in a market note that the FGN Eurobond space started the week on a bullish note as buy-side interests were seen across the curve. In sum, the average rate was down by 18 basis points to close at 11.82%.
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