Amidst economic uncertainty, the prevailing risk perception toward the naira asset has changed, resulting in a stabilization of the benchmark rate on Nigerian Treasury notes. Following modest asset repricing, the yield has been circling between 10 and 11 percent recently, nevertheless lagging below the annual inflation rate.
Despite a decline in the amount of liquidity in the financial system, the secondary market had a comparatively calm trading session. Selloffs of Treasury securities typically occur in response to a decrease in liquidity as banks look to increase their demand for liquidity.
According to Cordros Capital’s market analysis, the overnight lending rate increased by 348 basis points to 20.6% as a result of the debits for yesterday’s OMO auction (N77.20 billion), according to data from FMDQ.
Trading in the T-bills secondary market was calm though, as the average yield remained at 11.13% versus an annual inflation rate of 26.72%. The headline inflation rate is projected to rise further due to depreciation of the local currency, and subsidy removal.
Across the curve, Cordros Capital analysts said the average yield was flat at the short and mid segments but pared at the long (-1bp) end. This was a result of mild interest in the 329-day to-maturity (-1bp) bill.
After the primary market auction conducted by the apex bank, trading activities in the OMO segment were quiet. Thus, the average yield was unchanged at 12.0%.
While the Nigerian Interbank Treasury Bills True Yield (NITTY) exhibited mixed movements on Thursday across all tenor options, traders are projecting that yield would rise before the year’s close.
In the foreign exchange market, the naira depreciated by 0.9% to N793.28 on US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM). The local currency is facing multiple pressures due to a shortage of FX supply. However, the apex bank has launched a fresh move to clear FX backlog.
Analysts see the development as positive for the economy, saying the move will improve investors’ sentiment. In the secondary market for FGN Bonds, trading on Thursday exhibited mixed results. The average yield inched slightly higher by 5 basis points (bps) to reach 15.42%.
This increase was primarily driven by yield expansions of 51 and 35 basis points observed in the MAR-50 and FEB-28 FGN bonds, respectively, according to Cowry Asset Limited.
In Nigeria’s sovereign Eurobonds market, there was a positive level of activity. Buy sentiment was evident across the short, mid, and long ends of the yield curve, leading to a decline in the average yield by 48 bps to 11.14% on Thursday.
