Yield Steadies as CBN Sets to Rollover N118.73bn Maturing T-Bills
The average yield steadies on Tuesday as the Central Bank of Nigeria (CBN) sets to roll over N118.73 billion maturing Treasury bills at the primary market auction (PMA) on Wednesday.
Consequently, yields across the fixed income instruments were steady due to cold trading sessions as traders set cautious alerts ahead of the auction. On Wednesday, the CBN will conduct an auction to roll over Nigerian Treasury bills maturities worth ₦118.73 billion across 91-day (₦3.54 billion), 182-day (₦4.12 billion), and 364-day (₦111.07 billion) tenors.
Analysts polled by MarketForces Africa are expecting spot rates on 364-day will fall due to the disinflationary trend, better financial market liquidity and CBN dovish stance.
Again, CBN monetary policy committee keep key policy rates at the just concluded meeting, thus reducing the possibility of yield repricing in the fixed income market while disinflation narrowed negative real return earned by traders.
In the money market segment of the financial markets, short term interest rates maintain a downward trend due to relatively healthy financial system liquidity.
Today, the average interbank rate dropped by 116 basis points to close at 15.51%. Data from FMDQ Exchange shows that the overnight lending rate decreased by 0.98 percent to close at 16.02 percent as against the last close of 17.00 percent.
In the same light, the Open Buy Back (OBB) rate decreased by 1.33 percent to close at 15.00 percent compared to 16.33 percent on the previous day.
Meanwhile, the Nigerian Treasury bills secondary market closed on a flat note with the average yield across the curve remaining unchanged at 5.10 percent. The trading pattern remained unchanged as investors await the outcome of the MPC.
After the meeting, the CBN policy committee unanimously voted to retain Monetary Policy Rate (MPR) at 11.5 percent, with the asymmetric corridor retained at +100/-700 bps around the MPR.
The Cash Reserve Ratio (CRR) and Liquidity ratio were unchanged at 27.5 percent and 30.0 percent, respectively.
Reacting to the development, average yields across short-term, medium-term, and long-term maturities closed flat at 3.96 percent, 4.80 percent, and 5.82 percent, respectively.
In the OMO bills market, the average yield across the curve increased by 1 basis point to close at 5.49 percent as against the last close of 5.48 percent, separate analysts’ notes show.
Average yield across the long-term maturities expanded by 11 basis points as OMO 4-Oct-22 (+22 bps) maturity bill witnessed selling pressure, according to FSDH Capital.
However, analysts said the average yields across short-term and medium-term maturities closed flat at 5.36 percent and 5.54 percent, respectively.
There was also a cold trading pattern in the bonds space today. FGN bonds secondary market closed on flattish again as the average bond yield across the curve steadied at 8.43 percent.
Average yields across short tenor and medium tenor of the curve remained unchanged, analysts’ notes stated. However, the average yield across the long tenor of the curve mildly increased by 2 basis points.
FSDH said in its note that this year, the Debt Management Office has a domestic funding target of ₦2.74 trillion -including the supplementary budget.
To date, analysts said the DMO has raised ₦2.60 trillion at its bond auctions, including non-competitive sales to public agencies.
Considering year-to-date FGN bond sales, the DMO is well placed to achieve the target even without the small sums it makes from the sale of other instruments such as Sukuk and green bonds, FSDH Capital said.
In the Eurobond market, Alpha Morgan Capital note hinted that trading activities sustained its bearish stance from the prior session following selloffs across the sovereign curve. As a result, the average yield climbed by 28 basis points to close at 7.43%.
U.S Treasury 7-Year Auction High Yield Rises, Demand Advanced
The U.S Treasury’s 7-year auction hit a high yield of 1.588% on Thursday, up from the 1.461% high in the previous auction. The bid to cover ratio for the auction was 2.42, above the 2.25 ratio in the previous auction.
Dealers represented 57.32% of the bids, with direct bidders at 14.1% and indirect bidders at 28.59%. For takedown, bidders took 17.43%, with direct bidders at 23.28% and indirects were awarded 59.29%. #Yield Steadies as CBN Sets to Rollover N118.73bn Maturing T-Bills
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source https://dmarketforces.com/yield-steadies-as-cbn-sets-to-rollover-n118-73bn-maturing-t-bills/