T-Bills Steady As Yield On FGN Bond Hits 12.70%

Investors in the fixed income market have raised the bar by demanding inflation-protected returns on their investment placement, showing apathy at the bonds reopening auction conducted by the Debt Management Office (DMO).

At the auction, the subscription level was unimpressive, thus forcing Nigeria’s debt office to raise marginal rates across bonds instrument classes for three, ten and 20 years.

The debt capital market has been under pressure following interest rate hikes while headline inflation continues to widen. Though for investors, it costs money to keep money; the market is riding on tight liquidity and higher inflation which exposed naira assets to risk.

In the money market, data from the FMDQ Exchange platform indicates that the average interbank rate climbed by 50 basis points to close at 14.75 per cent. This resulted from higher short-term interest rates driven by tight liquidity as the Central Bank also adjusted rates on savings deposits to 4.2 per cent.

Then, the Open Buy Back rate and Overnight rate both climbed by 50 basis points apiece to close at 14.50 per cent and 15.00 per cent, respectively amidst lower maturities.

Analysts believe that the Central Bank of Nigeria (CBN) cash reserve ratio is putting pressure on the local banks’ liquidity position. This has led to large participation in the apex bank standing lending facility.

Meanwhile, trading activities in the secondary market for Nigerian Treasury bills remain tight, cold and quiet as a thin transaction was observed in the space. With a relatively flattish transaction, the average yield was unchanged at 7.67 per cent.

After a cold outing at the DMO bonds auction, there was a mixed sentiment in the secondary market for trading FGN bonds – with a bearish tilt. As a result, the average yield climbed by three basis points to close at 12.72 per cent yesterday.